Vertical demand-supply business nets in tourism: some empirical findings

AuthorMika Saloheimo
PositionUniversity of Lapland Department of Research Methodology
Pages60-70

Page 60

Introduction

In recent years there has been a strong development of different web-based e- commerce and e-business solutions in multitude of industries. However, the development has not been so strong in case of SME-driven tourism industry. In Finland, the adoption of e- business solutions has also been slow, even in the major tourism regions like Lapland. There have been several failures in the production of appropriate software solutions for tourism industry, the supply of information systems is low and tourism companies are sceptical of IT benefits in their business.

From this point of departure, there was a research project (ONI, Operative Network Integration), which aimed to model the tourism business operations conducted by interconnected group of companies. This group can be characterized as a vertical demand- supply business net. This model forms the basis for the design of potential information systems to be used in the SME-driven tourism industry.

In initial phase, the research questions were: What are the elements of vertical demand-supply business nets operating in the tourism industry? How are these elements connected to each other? What kind of information is transferred between them? These questions represent preliminary business analysis the process of information systems design.

To answer these questions, a theoretical framework was developed based on business network literature. Recent literature of tourism specific networks was reviewed and the theoretical framework was chosen from The Industrial Network Approach. A qualitative case study of one current business net was conducted. In this paper the theoretical background, research process and research results are presented and discussed. Also, some future research directions are brought forward.

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Literature review

In general, the supply-side research of tourism is less advanced than the demand-side. This is attributed to the inadequacies of mainstream economic theories based on standardized commodities. Tourism products and the production processes are heterogeneous and complex. They are based on different kinds of technological know-how, e.g. retailing, tour operations, transport and hospitality. Tourism system should depict firms as functionally and technologically diversified, but interdependent in their aim to satisfy consumer needs. The network approach is suitable for analyzing tourism supply-side, maybe even so that term "tourism network" should be used instead of "tourism industry". (Tremblay 1998) Li & Petrick (2007) suggest that tourism marketing is facing a paradigm shift to relationship marketing, network approach and service-dominant logic.

Gibson et al. (2005) examine local destination networks drawing from the business network lifecycle model (Morrison et al. 2002) and benefits of networks for tourism destinations (Lynch et al. 2000). The life cycle stages of the network are start-up, growth and reinvention and the benefits derived from the networks are related to learning and exchange, business activity and community. Novelli et al. (2005) have studied the role of networks and clusters in tourism innovations. Networks are able to provide firms access to knowledge, resources, markets or technologies. The success of tourism networks is related to network objectives, structure and leadership, resourcing, member engagement and inter-organisational learning (Morrison et al. 2004).

In their study of hospitality service networks, Kandampully & Promsivapallop (2005) describe how businesses are shifting from "generalists" to "specialists" and consequently are looking for complementary competencies from their network environment. This focus on the core competencies is the driving force behind strategic business networking. In her study of tourism policy networks, Dredge (2006) presents different dimensions of the networks: actors, functions, structure, institutionalisation, rules, power relations and actor strategies. These dimensions should be taken into account regarding the management of tourism networks.

According to Tremblay (1998), one of the network types in tourism is the "vertical alliance for tourists from location X". This network connects different competences into a consistent product, requiring time and place synchronization of activities. Sorensen (2004) recognized the tourism production networks consisting of producers and users of different services. Production networks are not centrally coordinated with hierarchical organization or only by market-driven price mechanisms. The coordination exists in interaction between network actors. This network relies on information creation, gathering, application and communications. Information connects different producers of tourism experience. In production networks this information is operative (related to products, bookings, etc.) in nature, guiding the day-to-day operations.

The operation of the supply chain is central in the tourism industry. The products sold are intangible and perishable. The traditional supply chain includes suppliers, consumers, tourist boards, tour operators, travel agents and reservation systems. In other words, the product is a combination of accommodation, transportation, attractions, and a packaging service that binds these components together and sells them directly or through an intermediary to the consumer. (Gratzer 2003) Tourist destination is perceived as a system with inputs and outputs, containing components of attractions, services, infrastructure, and so on. Destination systems are under- researched from the producer's perspective. (Tinsley & Lynch 2001)

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Shih (2006) has used network analysis to investigate characteristics of drive tourism destinations and to plan appropriate facilities and services for each destination. Pavlovich (2003) has described the evolution and transformation of tourism destination network. Scott et al. (2008) use Network Analysis to examine structural properties of inter-organizational networks within tourism destinations. The information flows between key actors is basis for their analysis. Tourism involves more collaboration, partnerships and networks than...

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