Multinational Corporations

Newell and Frynas (2007) argue that although it is true that tourism business contribute to the provision of employment, goods and services, investment, shaping developing countries and policies to alleviate poverty, numerous questions arise. These include whether voluntarily tourism business-as-usual practices can reduce poverty or whether government-led developmental practices should rather drive and regulate these activities. These were some of the investigative concerns for the researcher.

Increasing interactions imply more interconnections and, thus, more active involvement and increased dominance of MNCs and TNCs in the tourism industry, which leads to economic globalisation (Heath, 2001). According to Peric (2005), mega corporations and multinationals are the most exposed agents of globalisation. These large corporations enjoy global dominance and have monopolistic features involving economies of scale, increased market share and the suppression of competition.

Sharp (2006) and Mazilu (2011) agree that the emergence of MNCs and TNCs can have positive effects. These companies have the ability to reduce the gap between the rich and poor and support global relaxation, peace, humanity’s security

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assurance and sustainable development through alliances (Heath, 2001; Peric, 2005). The reasons for forming alliances differ. For example, Rwanda attracts more foreign investors to bring more foreign direct investment (FDI) to the country (Nkurayija, 2011). In Indonesia, the government is allowing 100 per cent foreign ownership in the tourism industry while making provision for foreign professional workers to create employment (Sugiyarto, Blke & Sinclair, 2003).

Tourism MNCs and TNCs are under pressure to provide high quality, standardised products that meet international standards in an increasingly competitive environment, especially in developing countries (Antonescu & Stock, 2013). To overcome this, tourism businesses are forced to implement horizontal alliances (Heath, 2001). Tourism businesses usually merge with other companies that are at their level in the distribution chain. For example, British Airways and American Airlines have forged a trans-Atlantic alliance (Heath, 2001; Antonescu & Stock, 2013). Licencing and franchising have also been popular forms of horizontal alliance. Marriott, Sheraton and Radisson (America); Holiday Inn and Hilton (United Kingdom); Club Mediterrance and Accor (France); Inter-continental (Japan); and McDonald’s, Wimpy and Avis car rental are examples of horizontal integration that exist in developing countries. By forming alliances, tourism businesses overcome emerging competition (Heath, 2001). However, Peric (2005) mentions that SMMEs are usually disadvantaged in the process, due to high production costs.

In developing countries and in Africa in particular, numerous positive economic effects are associated with the globalisation of tourism, especially through MNCs. These include the creation of new tourist attractions, new markets and additional funds for infrastructure development (Heath, 2001; Mpofu, 2009; Antonescu & Stock, 2013). Furthermore, the globalisation of tourism assists in the generation of foreign currency earnings, balance of payments and an increase in government revenues from the taxation of multinational corporations. However, Heath (2001) argues that although MNCs aid the development of countries, this is seldom sustainable. The researcher agrees with Heath that MNCs do not have long-term commitments to particular destinations, and they are often less concerned about the effects of their activities on the environment, economy and community of the host country. In addition, SMTEs and local tourism businesses generally are afraid to develop

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relationships with large tourism businesses (Heath, 2001). As a result, Peric (2005) believes that globalisation primarily brings about negative influences on social values, culture and the environment. The researcher in the current study paid attention on the type and extent of integration and relationship that exists between major tourism corporations and SMTEs. To what extent does government facilitate this relationship, more especially with previously disadvantage group.

Moreover, governments may fail to promote policies that can benefit all stakeholders in the tourism industry (Peric, 2005). Such failures can lead to excessive wealth at one pole while those at the other pole remain poor (Mazilu, 2011). Hence the researcher in the current study investigated the spatial concentration of tourism production and consumption. Thus, the structural and spatial aspects of tourism development. There is a tendency to concentrate decision-making power in these large foreign-owned tourism businesses. Furthermore, foreign businesses may choose a site or area to develop businesses activities that may influence the operation of local tourism businesses in various ways. Large corporations may also compel the authorities in a potential area of investment to comply with certain conditions or effect changes to local laws before they invest. Newell and Frynas (2007) and Zmyslony (2011) argue that globalisation decreases the role of states in the arena of international economic relations and that state power decreases when global capital power increases. Only a few economies with strong government intervention (China and Russia) can resist the pressure of globalisation and liberalisation. Additionally, globalisation can increase the interdependency of large corporations and SMMEs. Peric (2005) and Hjalager (2007) assert that when local markets become saturated, tourism businesses seek new selling opportunities in the international market.

In addition to the interdependency of local tourism businesses on foreign businesses, large tour operators have strong positive influences on the way hotels operate. They influence hotel prices and can impose conditions on local suppliers, such as ensuring that suppliers are committed to protecting the environment (Peric, 2005). In this study the researcher analysed various tourism BSR driving forces to establish an understanding of BSR structure in South Africa and Western Cape tourism industry. Heath (2001) comments that new visitor management programmes

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should be adopted by the tourism industry as a whole to release pressure on the world‘s “honey pots”. For example, the green tourism approach, where some hotels use recycled products and encourage their guests not to request that their sheets and towels be changed every day, is becoming popular. Various questions were developed in order to establish the Western Cape tourism industry’s BSR activities. The sustainability of these activities were analysed.