The potential Impact of International Franchising in Promoting and Developing Tourism Business in the Kingdom of Saudi Arabia (KSA)
Alharbi, Mona Mohammed M
Date: 15 October 2015
University of Exeter
PhD in Management Studies
This research paper aims to examine how international franchising can be a development tool for SMEs, an initiation tool for start-ups, and a strategic tool for the government and private sector in the tourism industry of the kingdom of Saudi Arabia (KSA). The tourism industry is a relatively new phenomenon in KSA, recognized only ...
This research paper aims to examine how international franchising can be a development tool for SMEs, an initiation tool for start-ups, and a strategic tool for the government and private sector in the tourism industry of the kingdom of Saudi Arabia (KSA). The tourism industry is a relatively new phenomenon in KSA, recognized only after the inception of the Saudi Commission for Tourism and Antiquities (SCTA) in 2000. Since then, SCTA made great efforts and reforms to improve the economic, social, and cultural environment of the sector. However, the tourism in KSA still faces an array of obstacles, mainly related to the prevailing inadequacies of human capital and only a modest supply of services catering specifically for tourist, both in terms of quantity and quality. Therefore, the initiation of tourism industry in KSA necessitates learning from countries that have prior and intensive experience in tourism. International franchising represents a possible means of eliminating a large number of barriers preventing or dissuading people from doing business in general and in the tourism industry in particular, especially through its ability to make up for the lack of business experience and knowledge on the side of ‘newcomers’ in this industry. More specifically, this study aims to research the possibility of adopting international franchising with its proven business models that meet the international standards by the tourism industry in KSA as a systematic solution to its most persisting weaknesses. Three phases of sequential mixed methods were used to examine the potential impact of international franchising on developing tourism investment in KSA. Phase one involved qualitative research through preliminary interviews with officials and experts in the franchising and tourism sectors, to investigate the current situation of the research topic and identify the barriers and drivers of both sectors. Phase two involved quantitative research through follow up to the two questionnaires with owners/managers of franchises (n=104) and tourism businesses (n=475) to validate the initial exploration, and make an intersection between international franchising and tourism, through common questions between the questionnaires. This lead to further exploration in phase three, which examined the actual experience of international franchising in four case studies, mostly in tourism, who had converted from independent businesses to franchisees of international brands. The findings indicate that international franchising can be a development tool for SMEs and an initiation tool for start-ups in the tourism industry. This study provides evidence that international franchising can have a great impact on enhancing the intellectual capital of local businesses, including human capital, relational capital and organizational capital, as well as financial performance. The traditional tourism activities (accommodation, restaurants, cafes and travel agencies) have high potential for successful franchising in KSA. Due to the unpopularity of franchising in some activities, uncertainty appears in non-traditional tourism activities such as entertainment, resorts, training institutes, tourism guidance and tour organisers, and motorway services. The diffusion of international franchising, along with its potential impact on development, is conditional on the issuance of an independent franchise law and the lifting of some barriers related to administration, financial support and marketing in the tourism sector.
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