ISSN 1822-6515 ISSN 1822-6515

EKONOMIKA IR VADYBA: 2007. 12 ECONOMICS AND MANAGEMENT: 2007. 12

THE REASONS AND CONSEQUENCES OF CHANGES IN

ORGANIZATIONAL STRUCTURES OF TOURISM COMPANIES
Valentinas Navickas, Akvil 6ibinskien
Kaunas University of Technology, Lithuania
valentinas.navickas@ktu.lt, akvile.cibinskiene@ktu.lt

Abstract
Changes and alterations in organizational structures of tourism companies have a vital influence on
their competitive position in tourism market. Only those companies and industries (tourism industry is no
exception) that continuously look for new business opportunities and skilfully apply them are capable of
maintaining their competitiveness in the global economy. All the more, companies must react to changes in
economic environment and evaluate tendencies of tourism representation forms. Thus, the purpose of this
study is to investigate changes in organizational structures of tourism companies, defining their reasons and
consequences. In order to achieve the purpose, the following scientific methods are applied in the study:
analysis of economic literature, logical and comparative analysis of economic phenomena, graphic methods
and their generalization. It can be deduced that new types of organizational business structures are to be
considered one of important innovations, helpful in gaining and maintaining competitiveness in the global
tourism markets. Global unions of businesses (networks), strategic alliances (unions) integrate various
business activities that are dispersed in the global economic space. These activities make a united precisely
functioning complex, which is one of the most important consequences of changes in organizational
structures of tourism companies.
Keywords: tourism companies, development of organizational structures.

Introduction
Competition in global tourism market tends to intensify. As a result of global economy conditions,
customers become more informed and sophisticated, and it enables them to put pressure on tourism industry
companies. Competition becomes strong not only among tourism agencies, but also amid participants of
other leisure market industries. Therefore companies and industries must look for new business opportunities
and go through structural changes to increase their competitiveness in the global markets.
Object of the study - structural changes of tourism companies in the global economy.
Purpose of the study – to investigate structural changes of tourism companies in the global economy,
defining their reasons and consequences.
Objectives of the study:
1. To describe competitive conditions in global tourism markets.
2. To investigate changes in representation forms of tourism service in the global economy.
3. To analyze positive and negative consequences of structural changes of tourism companies.
Problem statement. Competitive conditions of nowadays’ economy result in structural changes of
tourism markets and their participants. Reasons, challenges and consequences of these processes are
investigated by numerous foreign scientists (Michall, 2004; Holloway, 2003; Pompl, Lavery, 2004;
Williams, 2002; Wickens, 2002; Snepenger, 2003). Scientific researches dedicated to the analysis of the
problems mentioned above are not carried out in Lithuania, however.
Methods. The following scientific methods are applied in the study: analysis of economic literature,
logical and comparative analysis of economic phenomena, graphic methods and their generalization.

Tourism representation: a factor that globalizes tourism markets

Global tourism is an increasingly competitive and changeable market. According to Scotland‘s
national tourist board Visit Scotland (2005), more than 193 countries are fighting for market share with many
of them providing similar product offerings aimed at similar target markets.
East Asia and the Pacific, South Asia, the Middle East and Africa are forecasted to record growth at
rates of over 5 % per year, compared to the world average of 4.1 % per year. The more mature regions -
Europe and Americas - are anticipated to show lower than average growth rates. Europe will maintain the
highest share of world arrivals, although there will be a decline from 60 % in 1995 to 46 % in 2020 (The
World Tourism Organization, 2006).

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 The forecast shows that customers are inclined to choose exotic tourism destinations, such as Asia,
Africa, and the Pacific region. The growing prominence and accessibility of new destinations is intensifying
and fortifying competitive pressures, particularly in the expanding short break market. Therefore European
countries (including Lithuania) must increase their attractiveness.
Another tendency, characteristic of global tourism, is the evolution of customers. They are becoming
more knowledgeable and sophisticated, and thus more powerful, while tourism is vulnerable, dependent on
discretionary spending. There is also competition for consumer disposable income from other leisure
activities such as entertainment, hobbies and shopping (Shermach, 2005; Wickens, 2002; Williams,
2002).The greatest tourism potential in European tourism system is concentrated in Central and Eastern
Europe. In order to use these opportunities, countries and regions must seek for unique ways to represent
their tourism service.
Tourism representation is one of the factors that globalize tourism markets. Changes of vital
importance have occurred in marketing strategy during the last years. These changes are particularly obvious
in mass media industry (television, radio, print). The reason of these turns and shifts lies in two interrelated
forces. One of them – an increasing use of digital technologies that enable customers to control the flows of
information they receive. The second force is fragmentation of audiences that receive information. These
forces have a great influence on marketing communication business, including service representation forms,
strategy of creating promotional messages and evaluation tools (Buchwalter, 2005).
According to Franks and Mills (2005), there are several trends in marketing of tourism agencies:
‚ Joint communication. For example, St Andrews Travel Agency, based in Bolton (Great Britain),
produces a 36-page annual newspaper, sponsored by hotels, airlines and operators. The newspaper
results in both - enhancing their brands and creating awareness by adding a human element -
getting people to talk about their holidays so their neighbours could read it and want to do the
same. It is distributed at agency event evenings, as well as being available in the shop year-round.
‚ Unique service representation. For example, Roger Walker Travel Agency, based in Winchester
(Great Britain), uses a unique way to promote trips to East Asia - driving round in an Indian
rickshaw. Rickshaws come in corporate colours, black and yellow, and get company noticed by
potential customers.
‚ Specialized events: brochure parties and community events.
- First Choice has turned brochure launches into a marketing opportunity for its agencies. The
company typically organizes the event in March or April, more than a year before the start of
the summer season, so that the new brochures can be showed off. Preparation starts early,
making customers aware the summer brochures are coming out soon. If they are interested,
personal invitations to the night are sent out. The new brochures offer some special deals,
such as free child places for families; family offers in August long-haul deals; holidays
requiring low deposits; offers for couples wishing to get married in exotic destinations
(Gunn, 1994; Goossens, 2000).
- Worldchoice Travel, based in New Maiden (Great Britain) held a Chilean wine evening in
order to promote trips to Latin America. The travel agency provided wine, music and
dancing from the region outside the agency on the day of the carnival (Yuan et al., 2005).
Giving customers a real taste of holiday destinations encouraged them to make a booking.
The cases analyzed above show that event-based marketing has become an important form of tourism
service representation. Whilst using unique ways to present their service, and enabling customers to try and
taste it (for instance, during community events, where potential customers can actually explore the culture
and cuisine of the country that is being promoted by a travel agency), companies are able to compete more
effectively.
Competitive and dynamic conditions of global tourism market prevent regions and countries from
relying solely on representative activities of tourism agencies. It is necessary to create infrastructure of
tourism representation and create an image, which would appeal to both – potential inbound tourists and
foreign travel agencies that intend to broaden the scope of tourist destinations (Echtner, 1999; Gnoth, 1997;
Snepenger et al., 2003; Ryan et al., 1998).
Event marketing is one of the most effective ways to turn a country or region name to a brand name.
Thus event-based marketing should be included in a set of strategic tourism stimulation tools. Competitive
conditions of today’s economy result in necessity to modify and update tourism representation strategy not
only at company (industry) level, but also at regional and national levels.

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 New organizational structures in tourism industry
New specific structures tend to form in the global economy. One of their results is the effect of
synergy, which increases competitive advantage of each participant and structural unit as a whole (Michall,
2004; Holloway, 2003). The strategy of synergy is fairly acceptable for the processes of planning and
managing in tourism industry, in order to solve the problems related to technologies, costs, infrastructure,
etc. The first Europe-based global alliances in tourism industry appeared in the end of the 20th century in
Germany („Preussag“, “C&N Touristic“), France („Nouvelles Frontieres“), and Great Britain („Thomson
Travel Group“, „First Choice“). Preussag group – the largest of mentioned above - fortified its positions in
European tourism industry with the acquisition of British Thomson Travel Group in 2000. Preussag group
acquired a stake in Nouvelles Frontieres (a French travel group) in 2000. Nouvelles Frontieres has been part
of TUI (former Preussag) group since 2002. The reorganization of TUI group is to be completed soon.
Revenue from heavy industry related activities accounted for 93 percent of all revenue of the group in 1997.
At the moment TUI group is oriented towards tourism industry - revenue from tourism and logistics
accounted for 72 percent and 19 percent (accordingly) of all revenue of the group in 2005 (TUI AG, 2006).
The study performed by the authors indicates that intentional development of global alliances in
tourism industry can result in negative effects as well. In the process of formation of these global networks
companies and industries lose their national character, because the peculiarities of national borders and
national consumers seem to be ignored, and therefore might become less flexible in dynamic business
environment. Tourism industry products are usually intangible. It enables other companies to copy the effect
of synergy very fast. When copying becomes obvious tourism companies are forced to initiate the revision of
their product portfolio, as well as diversification of products and search for new market segments (Pompl,
Lavery, 2004; Woodside et al., 2002; Zeithaml et al., 2002). The authors of this study identify the importance
of competitors’ entry and withdrawal and analyze the life cycle of tourism industry, concentrating on entry-
withdrawal stages. There are three possible variations of competitive life cycle model in tourism industry:
1. The present market structure remains the same.
2. The present market structure tends to turn into monopolistic market structures.
3. The present market structure tends to turn into more competitive market structures.
Number of companies

Entry

Withdra
wal

Time

Figure 1. The model of competitive life cycle in tourism industry when the present market structure remains
the same. Created by the authors, 2006

The results of this study show that the inclination of entry-withdrawal way indicates changes in market
structure and the necessity of new organizational structures. The cycle shows that market cannot be “empty”
– when some companies leave, they are soon replaced by new contrahents, even if those contrahents do not
have a particular competitive advantage. The analysis of the life cycle of tourism industry indicates that the
development of organizational structures in tourism industry is an objective process, which is particularly
obvious in the global economy.

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 Conclusions
1. As a result of global economy conditions and intensifying competition among tourism agencies
and amid participants of other leisure market industries, customers become more informed and
sophisticated. It enables them to put pressure on tourism industry companies. Furthermore,
customers are inclined to choose exotic tourism destinations, such as Asia, Africa and the Pacific
region. Thus European countries (including Lithuania) must increase their attractiveness.
2. The members of world tourism system tend to invest in interactive marketing tools. Interactive
marketing is aimed at establishing dialogues with individual customers. Event marketing, as an
interactive promotional tool, is one of the most effective ways to turn a country or region name to
a brand name. Thus event-based marketing should become an integral part of any tourism
strategy.
3. The changes of organizational structures in tourism industry in the global economy result in the
effect of synergy. The effect of synergy increases competitiveness and affects alterations in
market structure. The negative effects of this process are these: industries lose their national
character and they might become less flexible in dynamic business environment.

References
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Travel Trade Gazette UK & Ireland. September 23.
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169, (1/1998).
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12. Snepenger D. J., Murphy L., O’Connel R., Gregg E. (2003). Tourists and Residents Use of a Shopping Space.
Annals of Tourism Research, 30, 567, (3/2003).
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(3/2002).
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351, (4/2002).
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Framework and an Empirical Exploration: Journal of Travel Research, 41, 120, (2/2002).
16. Yuan, J., Liping, A. C. et al. (2005). An analysis of wine festival attendees‘ motivations: A synergy of wine, travel
and special events: Journal of Vacation Marketing. Jan., ABI/INFORM Global 41, (1/2005)
17. Zeithaml V. A., Bitner M. J. (2002) Services Marketing. 2d ed.: Irwin McGraw-Hill, Boston.
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20. World Tourism Organization (2006). http://www.world-tourism.org/.

Valentinas Navickas, Akvil 6ibinskien

TURIZMO BENDROVI ORGANIZACINI STRUKT R KAITOS PRIEŽASTYS BEI PASEKM S
Santrauka
Straipsnio tikslas – ištirti turizmo bendrovi organizacini strukt r pl tros procesus, nustatant j kaitos priežastis bei
pasekmes.
Tyrimo metodai – ekonomin s literat ros analiz , login bei lyginamoji ekonomikos reiškini analiz , grafiniai metodai ir
j apibendrinimas.
Ekonominio gyvenimo poky7iai vienoje pasaulio dalyje be žymesnio laiko atotr kio prasiskverbia kitas pasaulio vietas.
Tod l globalioje ekonomikoje konkurencingos išlieka tik tos bendrov s ar ištisos pramon s šakos (turizmo industrija ne išimtis),
kurios verslo tikslams realizuoti nuolat ieško nauj galimybi ir nedelsdamos jas naudoja. Naujos verslo organizacin s strukt ros

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traktuotinos kaip viena iš toki naujovi . Global s verslo susivienijimai (tinklai), strateginiai aljansai (s>jungos) funkcionaliai
integruoja tarptautin je ekonomin je erdv je išskaidytas veiklas, t.y. suriša jas viening> racionaliai funkcionuojant kompleks>.
Globalioje ekonomikoje formuojasi specifin s organizacin s strukt ros, kuri dalyviai gauna sinergin efekt> ir tuo b du
padidina naujo strukt rinio darinio (vieneto) bei jo dalyvi konkurencin pranašum>. Sinergijos strategija taikoma turizmo bendrovi
planavime bei valdyme, sprendžiant technologij , kašt , infrastrukt ros bei kitas problemas. Pirmieji global s susivienijimai turizmo
versle atsirado XX a. pabaigoje Vokietijoje („Preussag“, “C&N Touristic“), Pranc zijoje („Nouvelles Frontieres“), bei Didžiojoje
Britanijoje („Thomson Travel Group“, „First Choise“).
Straipsnio autori atlikti tyrimai rodo, kad turizmo versle vystant globalius susivienijimus gali atsirasti ir negatyv s
reiškiniai. Formuojantis tokiems globaliems tinklams bendrov ir/ar šaka praranda savo išskirtinai nacionalin pob d (nacionalin s
sienos bei nacionalini vartotoj ypatumai kaip ir ignoruojami), maž ja jos lankstumas besikei7ian7ioje verslo aplinkoje. Turizmo
versle produktas dažnai n ra materialus ir tod l gauti sinergijos efektai gali b ti labai greitai nukopijuojami. Kai kopijavimas tampa
akivaizdus turizmo bendrov s priverstos inicijuoti savo produkto portfelio perži r> bei diversifikacij> ir ieškoti nauj rinkos
segment .
vertindami konkurent at jim> ir iš jim> turizmo industrijoje straipsnio autoriai analizuoja jos gyvavimo konkurencinio
ciklo model , kuriame ištirtas (išskirtas) at jimo-iš jimo takas. Nustatyta, kad jo nuolydis parodo poky7ius rinkos strukt roje ir
nauj organizacini strukt r poreik . Ciklas parodo, kad rinka negali b ti „tuš7ia“, t.y. iš jusi iš jos viet> žaibiškai užima kiti
kontrahentai, nors ypatingu konkurenciniu pranašumu pastarieji gali ir nepasižym ti. Taigi, turizmo industrijos gyvavimo
konkurencinio ciklo analiz rodo, kad turizmo bendrovi organizacini strukt r pl tra yra objektyvus procesas, ypa7 išryšk jantis
globalioje ekonomikoje.
Rezultatai. Straipsnio autoriai tiria turizmo industrijos gyvavimo konkurencinio ciklo model . Atlikti tyrimai rodo, kad
turizmo bendrovi organizacini strukt r kaita globalioje ekonomikoje duoda sinergin efekt> ir tuo b du padidina
konkurencingum> bei daro tak> rinkos strukt ros poky7iams. Autoriai išskiria ir negatyvias šio proceso pasekmes: prarandamas
išskirtinai nacionalinis šakos pob dis, maž ja organizacini strukt r lankstumas nuolat kintan7ioje verslo aplinkoje.
Raktiniai žodžiai – turizmo bendrov s, organizacini strukt r pl tra.

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