Analyzing Thailands Tourism Industry

Analyzing Thailands Tourism IndustryAbstractIn the present mount of an increasingly globalized world, and the disposition of the touristry effort, it is worthwhile to note if ostiarys Diamond fashion model becalm provides answers to the changing agonisticalness of Thailands tourism and identifies success factors and factors detrimental to its competitiveness. A revised version of the Diamond framework has been proposed for the given context of tourism industry and Thailand secern. This write up tries to analyze Thailands Tourism industry using this revised form of Porters Diamond Framework, identifying the various sources of competitiveness or the lack of it thereof. It attempts to identify key argonas for improvement base on the above psychoanalysis and suggests solutions for the same.Keywords Competitiveness, Thailand, Tourism, Diamond Model, Revised frameworkIntroductionFor any verdant tourism impacts not however re locales scarcely employment and scotch develop ment as puff up. For Thailand, this is even much(prenominal) so. It is therefore important for Thailands tourism industry to be competitive not save in ASEAN argona but globally. Subsequent to the success of Visit Thailand Year in 1987, Thailand, a small country in the Asia Pacific region became the biggest growth story in the region with a growth rate of 7 %. Subsequently its economy (GDP) grew at an astounding 10.9 %, 13.2 % and 10 % respectively in the next three years i.e. an second-rate of 11.7 % from 1998 1990, about the best in the world. However, it did not maintain that growth subsequently, and its tourism industry faced many adversities. This paper will analyze the recent developments in the tourism industry to athletic supporter understand the reasons for the same in todays context.Today when not only individuals, products, avocation firms compete against each an oppositewise(prenominal)(prenominal) but industries and nations themselves strive to outflank th e competition, it becomes imperative to understand what it motors to beat the completion and stay competitive i.e. to acquires a good understanding of the determining factors of competitive growth. This paper proposes to do such an analysis for the tourism industry of Thailand.It all overly, argues a case for revising the Porters Diamond Model framework for the given context.Porters Diamond Model FrameworkBesides traditional imagination advantages equal land, location, labour, natural resources and size of population Porter (1990) argued that grouping or clusters of interconnected firms and stakeholders like institutions, suppliers and related industries provide competitive advantage which are not inherited and which can be acquired. To get a better understanding of the determinants for such attainment of competitive advantage, Porter (1990, 1998) provided the famous rhombus framework (Fig. 1). This framework abeted in the analysis of not only industries but also nations.The f our vertices of the ball field indicated four groups of determinants. These were factor conditions (also called input conditions), demand conditions, related and supporting industries and firm strategy, structure and rivalry. These were the basic determinants. in that respect were however two external or additional factors chance and goernment.All these factors were not isolated but interconnected. Thus, demand and factors conditions were connected. So were the factors related and supporting industries and firm strategy, structure and rivalry.The national factors of production like natural resources, infrastructure and apt labour are the key factor conditions. The nature of municipal help demand for product and services chiefly define the demand conditions. The presence (or absence) of suppliers, related industries which are themselves competitive (internationally) form the related and supporting industries vertex. The domestic rivalry between the firms and the conditions that g overn their formation, organization and management form the last vertex of the diamond in the framework.The framework is useful in identifying not only the sources of competitive advantage but also identifies key problem areas to be addressed. Oz (2006) illustrated this when identifying the sources of competitive advantage of Turkish construction companies in international markets. The success factors like dynamic domestic market, variables favourable to entrepreneurship, and intense domestic rivalry pressures effects were brought to fore along with the trouble causing areas like brass induced hindrances, difficulties in financing and weak consulting and design engineering capabilities positioning of Turkey in the international arena. However, there are limitations to this framework and many researchers hold in combined this with other form of analysis like Rugman and Verbeke (1993) used SWOT for comparison, citing flaws like difficulty in making it operational i.e. of putting it in practice. It is noteworthy that this framework is been applicable to services as given by Lee and Spisto (2007).The case for the Endogenous Role of governing body and ChanceApart from the limitation attributed to the diamond framework above, another flaw in it is that it does not accommodate government as one of the basic factors but only considers it as an external factor despite the fact that it greatly affects all the other basic factors. To compensate for this Wickham (2005) re-conceptualized the framework for the Australian context. It had government as an integral basic factor at the centre of the framework, visualised as government surrounded by all the other factors as vertices of a hexagon with the chance factor in incomplete (dotted) lines giving it a fracture identity as an external factor alone.He also suggested that the social function of chance be considered in with new attention when applied to a regional economic model like that of the Porters Diamond.Fig. 1 Determinants of Competitive Advantage Porters Diamond Model FrameworkFactor ConditionsChanceFirm Strategy, Structure Rivalry tie in Supporting IndustriesGovernmentDemand ConditionsThe importance of government policy curtain raisings to promote and develop the industry can be seen for the tourism context in Prideaux (1996), who on examining growth trends of Taiwanese inbound tourism to Australia, studied the factors responsible for this and listed them as better air connectivity, promotions and organization of Taiwans travel industry. Suggestion was also made that cite visitations would be greatly beneficial and to achieve better tourism prospects with Taiwan steps like forging links with operators in Taiwan, increasing frequency and connectivity of airlines, pagan education including language reproduction, and customization of products to suit Taiwanese tastes should be undertaken. The importance of the study lies in the fact that it provides a model for Thailand to replicate with neighbouring ASEAN nations. It provides inputs as to what it should do to objective a lucrative, individual nation like China. Clearly government policies and trade agreements with regional nations play a great role in determining the copulation competitiveness of Thailand as a tourist destination.The role of government and chance here, for the Thailand tourism industry plays a crucial role given the recent archives of Thailand it was the epicenter of the Asian financial crisis of 1997 it faced the Indian Ocean earthquake followed by Tsunami on 26th December 2004 it dealt with global recession post folk 11, 2001 attacks, the financial downturn of 2008, SARS (and H1N1 Flu phenomena) and more recently domestic political chaos. These seem to have impacted tourism severely. This builds the case of chance be a critical determinant in the diamond model leading to the assumption that it should definitely be regarded as an endogenous factor and not just one having an exogenous ro le in the whole framework.Pine, Chan and Leung (1996) have outlined the impact of the Asian economic downturn and stated that the economic downturn which impact adversely the tourism industry has led to slowing or halting of many projects in the hospitality arena. It noted that intra-regional tourism had grown referable to the regions unattackable economic growth. They elevate expect the tourism to be adversely affected (based on limited data) intra-regional tourism was expected to decline but increase from atomic number 63 and Americas in the light of the recent currency devaluations. Zhang (2005) has reported after analyzing industry data that Chinas outbound tourism got distributed as a result of the Tsunami. The southeastward eastern United States Asian and South Asian nations lost out on many Chinese tourists to hitherto new choice of destinations. The perception of the region was one of senior high risk and this eventually led to loss in tourist numbers and revenue. The new destinations garnering attention even saw escalation in prices. Travel insurance was more sought as a result of the tsunami phenomena. Also, Ichinosawa (2006) provides highlights as to how Tsunami stigmatized Phuket as a tourist destination. Leiper and Hing (1998) studied unrelated four events in 1997-98 in the Asian context and the impact on the tourism industries of the respective nations. The events included huge forest fires in Sumatra and Kalimantan, Chinese takeover of Hong Kong, the triggering of Asian Economic Crisis with currency collapse in Thailand and social and economic unrest in Indonesia and political and economic crises in Cambodia. These they inferred resulted in decline in international as well as domestic tourism. Thus, chance was a major(ip) factor here.Malhotra and Venkatesh (2009) have explored how vital it is to have contingency plans for crises and provide guidelines to proactively design a crisis management plan even to take care when things go really b ad. They compared Hong Kongs strategy and Thailands response to the Tsunami and the SARS outbreak. Based on such deliberations they advise having fluid structures and policies with regards to the organizational design, so as to effectively and timely deal with uncertainties of various kinds. They name various kinds of crisis, along with all their stages and depending upon the readiness of the affected entity (nation etc. determines the gap that needs to be filled in equipment casualty of crisis management. This they argue is the responsibility of the hospitality and tourism industry. The role of the government in formulating beneficial policies accordingly becomes crucial given the above chance factor is so influential in the tourism industry. Thus, roles of chance and government are said to be critical in relation to the tourism industry. The influence chance has over government policies (and even governments themselves) implies that chance is way too important and thus should be regarded as intrusive, internal factor integrated with the whole framework of the diamond model. Clearly, for the case of a highly particular industry like tourism and a country where the government (directly or indirectly) holds more than half of its net jacket stock (Phongsathorn, 2001), the government cannot be left out as just an exogenous factor. It is too important to be dealt as an influence. Thus, government should be design of as an endogenous factor in the model. Also, government today has more a role of a collaborator than just an influencer or policy maker.Considering that the diamond framework has not been applied to services as it has been to manufacturing industries, and also less work is done specifically on the tourism industry using the model, the role of the external factors need to be seen in new light. Besides, tourism itself is such an industry which in the case of nations like Thailand may incorporate the whole country as the operating area. More recentl y, Pettus and Helms (2008) have included government in an endogenous role in the diamond model framework, while analyzing the case of Argentina.Though, Porter (1990) has opined that chance events are outside the control of the industry, nevertheless its effect can be negated. Also, prudent investment and preparation can actually prevent the occurrences of artificial disasters and reduce the probability of many untoward incidents. Besides, the operationalization of chance even outside the diamond as an external factor is also very difficult.It is noteworthy also that chance even affects the government and its role. In the scenario of much globalized world where two countries are not isolated anymore and the events in one country affects the other in a more significant way than ever before the model requires an upgrading. Thus, a case has been made for the exogenous factors Government and Chance to be treated as endogenous. Therefore, in effect the diamond model gives way to the pro posed model (fig.2).Fig. 2 The Proposed Revised Porters Diamond Model FrameworkFactor ConditionsGovernmentRelated Supporting IndustriesFirm Strategy, Structure RivalryChanceDemand ConditionsResearch MethodologyThe study identifies the key variables that act as constituents to the various determinants of competitiveness of the tourism industry of Thailand. It also looks into the role played by Chance and the Government in altering the industrys competitiveness. For this, unforeseen events and government policies and their impacts were studied and extensive literary works reviewed to achieve the above stated objectives. A couple of telephonic interviews with Thai people were conducted to probe into specific areas and to corroborate findings. Thus, primarily the analysis is qualitative in nature.Discussion and AnalysisFactor ConditionsFactor conditions like infrastructure have been in the governments eye along with the human resources. However, it is perchance that the multi-million dollar airports that were to be a gateway to Thailand and its scenic beauty was the centre of anti-establishment protests and subsequently two airports were then shut down.Thailands natural resources like beautiful beaches definitely provide a competitive edge. This factor condition is also one of the key variables for the tourism industry. Its spicy pabulum, hospitality and exotic culture are inherent attractions.The significant external markets for the tourism industry are widely spread across the world and include major European countries, the U.S. and now even China.Thailands ideological commitment to liberalization and opened economy has had major impacts on the industry dynamics e peculiar(prenominal)ly over the long run. Knowledge resources also have grown. Capital resources which were an area for concern has been dealt well in recent times and policy measures for financial markets has made it more sound and less prone to international volatility in comparison to anterior years.Location is definitely an important issue here. Singapore and Taiwan are so important for global businesses because of their strategic location. Quality and quantity of highly skilled work force for the industry is also a huge concern. Serious policy initiatives are to be taken by the state in this regard. Recommendations include the continued development of various transport related infrastructure and maintaining and enhancing a skilled labour pool.The Tourism Authority of Thailand Travel Industry Portal provides online training for the industry personnel.Another facilitator for easy travel is a rail link from Suvarnabhumi International Airport to capital of Thailand by means of a sky train. This initiative reduces the travel time to 15 min and is greatly appreciated by travelers.1There is growth in the road linkages. The newly formed North South Economic Corridor links Thailand to other Asian countries by means of a twelve hundred km R3A road highway which links Thailand wi th Laos to China emerge from Chiang Rai in Thailand was developed successfully in 2009. Thailand is becoming sockn for its status as a definitive hub for regional aviation. It has strong aviation linkages and airlines presence. Now, many countries have more flights from Thailand than most others in the whole of Asia. There are weekly 131 direct by around 13 airlines connecting Middle East Asia. Thailand is served by over seven hundred flights per by charter, scheduled and low-cost airlines from all over the world. Thai Air slipway has also launched new routes to Abu Dhabhi and Jeddah form Bangkok. Tehran-Bangkok link has been proposed. Similarly, rival Emirates Airlines have inducted Airbus-380 aircrafts for its Bangkok route to provide daily service from the city of Dubai.2Human Resources Labour Force Statistics 2009 (Source NSO)Total population is 66.72 million of which persons who are aged below 15 are 14.15 million, and persons aged 15 years old and over 52.57 million. Total l abor force (Available for work) 37.53 million. Persons not in labor force (Not available for work) are 15.04 million. Thus, occupied persons are 36.50 million, unemployed persons are 0.78 million. Of these seasonally inactive are 0.25 million. Household workers are 4.93 million, students are 4.41 million, and others are 5.70 million.Fig. 3 Comparison of number of employed persons between Quarter 1 of 2008 and 2009 by IndustryUnit Million Persons(Source Labor Force Survey 2009, NSO)The physical and natural beauty of the beaches and islands of Thailand are the sterling(prenominal) attraction for tourists. Thailands most popular beaches and island destinations include along the Andaman Coast Phuket, Mu Ko Similan maritime National Park, Mu Ko Surin Marine National Park, Ao Phang-nga National Park, Krabi, Phi Phi Islands, Mu Ko Lanta Marine National Park, Tarutao Marine National Park along the Gulf of Thailand Cha-am ( humming Hin), Ko Samui, Ko Pha-ngan, Mu Ko Ang Thong Marine Natio nal Park, Ko Tao and along the east section Pattaya, Rayong Ko Samet and Ko Chang Marine National Park.The National Telecommunications Commission Act of Oct 2004 along with the earlier Telecommunications Business Act 2001 has done a people to setup the competitive environment for telecommunications industry. The formation of the Universal Service Fund by CAT (Communications Authority of Thailand) and TOT (Telecommunications Organization of Thailand) has provided impetus to the development of the industry. This has been implemental for the growth of the tourism industry of Thailand.Car (rentals), train, bus taxi services are available for transferral. A host of other offerings are available for interior transportation which includes motorcycle taxis, Tuk-Tuks, tricycles, bicycles and Song Thaeo or the very popular pick-up trucks. Charter, scheduled and low-cost airlines make up the air travel avenues cruises, boat, etc provide water transportation facilities. Railways provide a ccess to a large network of destinations in Thailand, providing economical and efficient transportation.Firm Strategy, RivalryCorruption and bureaucratic hurdles created by the government is another deterrent to it reaching its competitively superior position. Anti-trust policies of the Government are few and far between. There is a lot to be desired on this front from the Thai government. A recently enacted anti-competitive law had a monumental flaw in it as it did not apply to state-owned enterprises (that enjoyed monopoly). Environmental regulations are being looked into by the state.To be competitive on the global platform requires efficiently producing goods and services of value more than that provided by other competing nations. It is important for Thailand to do so for the tourism industry to make a mark for itself on the global platform especially when its productivity levels are low.Firms should lay emphasis on retentiveness of and attracting intellectual capital. Withi n the industry as well as across the industry technology should be shared.The affair Competition Act 1999 and thereby the Trade Competition Board helps provide fair trade. The General Agreement on Trades in Services (GATS) furthers this cause. However, the anti-trust policies are not very effective as these are biased in favour of the government. Also, the players pay a high price for the illegal or unethical practices of rivals. The governmental officials prove a bane as there is rampant corruption and cases of corporate cronyism provide hinder fair competition between the players. The rivalry is also relatively less intense than it could be to get more value for the consumers for the services offered. The local base of the competition makes the rivalry worthwhile. Employer and labour relations are adequately cooperative to discourage any untoward strikes or major hurdles in provision of productive output.There is adequate decentralization of various corporate activities and deleg ation of responsibility and bureau is a prevalent phenomenon. However, the corporate boards leave more to be desired in terms of efficacy.The cry for greater privatization is justified as it would certainly help in making the industry more competitive. Greater role of the private sector would ensure better management and corporate governance practices, reducing the business related corruption highly prevalent today. This process could be expedited by better corporate control activities, maintaining ethical business standards, sharing management know how, devising incentive based compensation systems, applying performance based appraisal systems, and having collaborative partnerships with local players with an understanding that practices to be in the right spirit, having joint investments, etc. Considering the significant role of the government in this industry, Private public partnerships (PPP) could effectively achieve the requisite competitiveness for being one of the best globa lly.No interrogative that if this is implemented properly over time then the incident revelations from CNNs survey of global travel and tourism that Thailand was the best on the basis of value for capital amongst all countries in the Asia Pacific region would not be an isolated event but among a series of similar results.Turtle Conservation broadcast in Mai Khao area which involved beach and reef cleaning also is a PPP initiative for environmental considerations.Interestingly, many hotels in Thailand have raised the quality standards in terms of environment friendliness by going smoke-free i.e. promoting anti-smoking measures.Thai Airways and Nok Air have decided to cooperate to boost up domestic traffic over specific routes like Bangkok to Phitsanulok, Bangkok to Ratchathani and Chiang Mai to Mae Hong SonAlready Thai Airways is part of the Star Alliance the worlds first major global airline alliance which aids its network operations.Demand ConditionsThe internal demand though g rown is limited by the population size and fluid incomes. Reductions in prices have encouraged local demand in recent years. However, Thailand may not be able to charge the premium it did during the hey-days. And any further price increase will discourage domestic demand. However, the internal demand for Thailands tourism industry offerings has been seen to grow in recent years.Advantage for Thailand exists in the offerings in terms of varied services and a competitive value proposition vis--vis other countries. Also, the active tendency of the local tourists to readily accept the latest offerings offered by the tourism industry makes the demand.A few regulatory standards for tourism based trade and environment are exacting in nature. Even the intellectual situation rights and safety standards for online transactions are less than desirable providing less encouragement for innovation and stimulation of demand.However, not only does the internal demand conditions condition the indu stry to become competitive globally it provides an avenue for experimentation and more importantly provides revenues when global tourist inflows ebbs below expected levels. Increasing internal demand could then easily be used as a hedge for fluctuations in collections from international tourists especially during the off seasons.Specialized market segments for specialized services and distinctive benefit segmentation provides impetus to the internal demand and subsequently to the external demand. In this regard providing incentives for innovation and aiding multinational corporations should be the policies pursued by the industry.There are various activities that a visitor or tourist can undertake for pleasure. Thailand offers a wide array of such offerings which include shopping, golf, adventure treks, pitcher tribe visit, special cooking and food, elephant rides, special festivals and celebrations, spa, spiritual and religious insights and learning (especially Buddhism), meditat ion, water sports, etc.Water sports include diving, sailing, yachting, cruising, canoeing and kayaking, swimming and snorkeling, fishing, windsurfing, rock climbing and bouldering, coal-black skiing and wakeboarding. Medical-tourism and business events also form an integral part of the range of offerings.Many indigenous events attract visitors from within and outside the country thereby touch on demand. Some key events that happened from time to time in Thailand are the Luang Phor Thuad and Sunflower Field feast dealing with the first blossoming of sunflower at a distinguished temple and paying tribute to Luang Phor Thuad, Chinese New Year Fair where prayers are offered the Chinese way, and there are opera shows and a food festival for vegetarians, Chinese Lantern Festival where a competition for lanterns and its decoration is held, World Wetland Day involving environmental related activities and awareness, bird watching and games, Eco-tourism and Kasalong Flower Festival involvi ng balefire and camping activities, showcasing of rare species of wild flowers and visiting caves, Thailand International Kite Festival that showcases traditional kites from different regions, kite flying competitions, etc Thai Sky Festival involving a show of Skydiving by skydivers from many countries, Traditional Gold Leaf Covering Ceremony at Kuiburi Temple involving prayers and religious rites and as the name suggests meretricious leaf covering, Blooming Lotus Festival providing a tour of the Lotus Pond and trekking, Hua Hin Jazz Festival where Jazz concerts are performed, Hua Hin Regatta involving a race of sailors, Hua Hin (Cha-am) Golf Festival involving golfing contests, Hua Hin Vintage Car Rally which involves parading vintage cars.Many sports events, trade events and festivals had been planned for attracting visitors to Thailand in 2009. master(prenominal) among these were the 1st World Comedy Film Festival, Thailand Grand Sale 2009, Thailand Tourism Festival (TTF) 2009, LPGA Thailand 2009 (Golf), The 2009 Kings Cup Elephant Polo Tournament, 1st Asian Martial Arts Games, Loi Kratong, Candle Festival, Songkran Festival and the 14th ASEAN Summit. New attractions like Sirindhorn Museum and Phu Kum Khao Dinosaur Excavation site, Chiang Mai Zoo Aquarium, Dragon Descendants Museum, etc have come up.It is interesting to note that Thailand was voted as the best sailing venue in Asia in a poll conducted by Top of The Gulf Regatta. Also, Phuket Kings Cup Regatta was the winner for best regatta in Asia. Thailand was also voted as the Asian holiday resort Capital for 2009 by AsiaSpa magazine. Also, Thailand won the Destiantion Spa of the year for Six Senses Destination Spa in Phuket.The major destinations chosen by tourists are (by region)Central Thailand Ayutthaya, Bangkok, Hua Hin, Kanchanaburi, Cha-Am, Chachoengsao, Lampun, Nonthaburi, Petchburi, Phetchaburi, Prachuab Khiri Khan, Pranburi, Samut Songkhram, Saraburi.Southern Thailand Koh Lanta Island, Koh P hi Phi Island, Koh Samui Island, Krabi, Phang Nga, Phuket, Trang, Chumphon, Hat Yai, Khao Lak, Koh Phangan Island, Koh Tao Island, Nakhon Si Thammarat, Ranong, Suratthani.Eastern Thailand Koh Chang Island, Koh Samed Island, Pattaya, Chanthaburi, Chonburi, Koh Kood Island, Rayong, Trat.Northern Thailand Chiang Mai, Chiang Rai, Mae Hong Son, Sukhothai, Lampang, Phetchabun, Phitsanulok, Tak.North-East Thailand Nakhonratchasima, Khon Kaen, Loei, Nong Khai, Ubonratchathani, Udonthani.Latest foreign technology is available to it and this should be made good use of by the industry players and the government. Use of ICT (info-communications and technology) in hotels and other areas is a step in the right direction.The following of the Star Rating methodology for hotel standards by Thailands premier hotels was a step in achieving quality and recognition.To the advantage of Thailand is the level of orientation of the tourists coming to Thailand and the internal tourists as well). These are mo re or less favourable for the state and should be capitalized upon. Thailand Travel Mart was a large showcase for travel and events held in June in Bangkok. Such events promote the internal demand significantly.Inadequate assent on experts and professionals for managing the business and related aspects of the industry, poor managerial innovation, low level research and development activities for the tourism industry, provides a hindrance for Thailand to emerge competitive against other players compromising the very nature of its competitive advantage. The extents to which it brands its industry though much better now and steadily improving over the years even in quality, leaves more to be desired in this front. Basing compensation on incentives is another recommendation for the industry. Training staff, at various levels is required to put together a skilled workforce and efficient labour pool for the industry.Related and Supporting IndustriesThe tourism industry is well connected and linked with industries like the transportation and hospitality. military strength services and has also provided impetus to the industry. However, the stigma of child prostitution and Aids epidemic is still a major concern for the government of Thailand.Labour productivity of Thailand is also not competitive at all. The revenues per tourist to Thailand are less than many competitors in the region. Also, these have not gone up over the years. Understandably, this was due to the chance factor but nevertheless, it seems to compromise the competitiveness of the industry even further.The importance of the framework applied here is that it helps identify sources of competitive advantage. One specific area of interest is the formation of clusters. Domestic rivalry and geographic concentration enhance competitiveness of Thailands tourism industry. The six factors depicted in fig. 2 help the framework act as system. Scalability, magnification and upgrading help provide linkages and netw orks. These thus help in forming clusters which provide competitive advantage.Efforts should be made to build special business relationships with the various players. Partnerships and alliances between and across the industry could help get the maximum value to the consumer inevitably making Thailand more competitive and the formation of clusters more evident, thereby benefitting the industry greatly. Provision of incentives to encourage and subsidies to support the entrepreneurial talent in the industrys core and related areas could benefit the industry in many ways including the adoption of innovative tools, techniques and methods and e