2.3.1 The term
The term management usually describes the leadership of an organizational unit. It is possible to differentiate between an institutional and a functional way of thinking. With regard to the former, management is a description of those groups of people who carry out management tasks, their activities and functions. As far as functional thinking is concerned, management is a term for all tasks and processes connected with the running of a working organization. In particular, these are planning, organization, implementation and control. The functional perspective of management can be extended to include a person-or material-related consideration.
The first use of the term crisis management is normally attributed to the political sphere. Accordingly, it is said that U.S. President J.F. Kennedy used the expression during the Cuban Crisis of 1962 to describe the handling of a serious, extraordinary situation. The term crisis management must be disassociated from risk management. The latter is focussing also on those events, which for the organization or destination are not causing serious or lasting damage. However, after risk management was originally limited to risks which were insurable, a steady tendency can be observed which intends to cover with risk management all different kinds of risks. However, this extension of the conceptional framework is not recommendable. It leads to an equalization of risk management and management as risks are immanent and by definition part of the decision and management processes. But also the limitation to only insurable risks is no longer timely, as in this area financial innovation, as weather derivatives water the definitional borders permanently.
Often the reason why the activities started but also the areas for which they apply determine which activities can be classified as being part of risk or already of crisis management. These transitional areas cannot be avoided. But they are also of no major importance. Nevertheless, it must be noted that from a practical point of view, the occupation with risks – i.e. also the fact that they are insurable – in destinations is often only then undertaken systematically, when preparations of crisis management are undertaken. The same can be found in tourism companies, although here the occupation with crisis management is found often in its early stage of application. After the activities were carried out here at the beginning only as a secondary function, they are now taken on more often exclusively and are directly linked with the highest management level. Decisive is finally that only crisis management is concentrating in its broad span on negative events which have the potential to cause crises. For doing so, it is also using the opportunities of risk management in the area of crisis prevention.
As in management, there is also a differentiation between crisis management as a function and as an institution. Crisis management as an institution refers to groups of persons who are responsible for
Management
Crisis management
crisis management activities. They are the dominant bearer of the functional crisis management.
Middle- and lower-level employees and external forces join with members of upper management levels as actors in a crisis.
Crisis management as a function refers to changes of tasks and processes when a crisis occurs. Different types of crisis management and corresponding activities are distinguished with regard to the process character of the crisis and the differentiation between its various phases.
In literature, the division of an active from a reactive form of crisis management predominates (Höhn, 1974; Krystek, 1979; Oelsnitz, 1993; Glaesser and Pechlaner, 2004). For the following analysis this division should be kept. In addition, four crisis activities can be distinguished. Assuming an ideal type of development, Diagram 10 portrays the activities over time.
Diagram 10: Phases of crisis management
Crisis prevention Crisis coping
Risk management
Crisis precautions Crisis avoidance Limitation of Recovery consequences
Risk management
Analysis Evaluation/ Protection/ Training Early Adjustment Employment of instruments Planning Implementation warning
Crisis prevention stands for the proactive anticipation of negative events, both mentally and in terms of preparation. In contrast to crisis coping, crisis prevention is characterized by continual occupation with the subject. It is comprised of the two areas, crisis precautions and crisis avoidance, in which both parts should not be necessarily viewed as temporally succeeding. They are rather independent parts, which, in practice and from a time perspective, can find themselves used one after the other or at the same time.
Crisis precautions describe planned precautionary activities and measures for more effective crisis coping, which are carried out with the aim of lowering the extent of damage. This area is consequentially of a strategic nature and includes risk policy, but also prepares operative crisis plans.
The object of crisis avoidance is to take measures that hinder the development of crisis out of identified crisis potentials. This is primarily the task of early warning, which deals with scanning and evaluation.
The aim of early warning is to detect events in time and to estimate their seriousness in order to quickly undertake countermeasures. The fundamental assumption, by which the sensibleness of avoidance crisis management is justified, is the possibility to advance the use of instruments. This is confirmed by observations of crises where, with the ex post contemplation, a cause or causes can be identified as the crisis trigger.
Definition: Crisis management
Crisis management is understood as the strategies, processes and measures which are planned and put into force to prevent and cope with crisis.
Crisis prevention
Crisis precautions
Crisis avoidance
At least theoretically, an ideal point in time for early warning can be determined. On the one hand, it is known that the destructive effect of a negative event increases with time and on the other, the number of possible countermeasures decreases until the affected organization is no longer in control of the situation. At the same time, the cost of early warning cannot be viewed as a fixed cost but as an additional expenditure that is mainly connected to the realization in good time. This expenditure decreases over the course of time because the assessment of developments becomes simpler and, therefore, cheaper. By the time a crisis is detected using conventional instruments, the cost is zero. It becomes clear, therefore, that it is not the realization ‘at the earliest stage’ but ‘early enough’ in the sense of giving sufficient time for reactions that must be the objective of early warning systems to avoid crises.
This ‘early enough’ varies depending on the endangered area and the possible negative event.
Apart from early warning, crisis avoidance deals with the adjustment of the organization to the situation in that it increases the reaction speed. Because this adjustment can be triggered by a negative event, the lines between preventive and coping activities become blurred.
Crisis coping has a defeating character. It is suddenly initiated and portrays an active and intended exertion of influence over the situation that can be carried out by the affected organization or others.
It starts with the identification of a crisis situation.
While dealing with the causes of crisis and while stopping them, all management instruments need to be employed to limit the consequences and to bring the crisis situation to an end. During the following phase of the recovery, all activities aim at overcoming the momentary negative consequences of the crisis. That includes the part of the ‘lessons learned’ through which the organization aims at avoiding future crises by learning from the present situation.
Considering the process of crisis management as a whole, a fluid transition from prevention to actually coping with the crisis is revealed. Previously seen limitations of crisis management to coping activities in the sense of a coping crisis management do not make much sense. Rather the particular challenges are lying in the preventive area of crisis management. This corresponds to the way the praxis is dealing with negative events, where all management areas within a company become involved. Therefore, the activities of both prevention and coping should be subsumed to crisis management just as crisis management should be understood as an extensive management problem. This form of crisis management is dependent on the crisis phases, both part of regular corporate planning and also independent from it. The former is the case if it concerns preventive crisis management. The latter is the case if it concerns coping crisis management that is not only independent from regular corporate planning but can also change or replace its results.
2.3.2 The challenges for crisis management in the tourism industry
As a general discussion about crisis and crisis management were brought to the fore in the preceding remarks, a general concept for crisis management in tourism should be developed in the following. For this purpose, the tourism system is presented, the classification and description of units participating in tourism is looked into and the types and effects of negative events in tourism are investigated.
2.3.2.1 The tourism system
Tourism is a phenomenon of the modern era and describes, in general terms, everything connected with travel. Generally, there are three constitutive characteristics: change of location, temporary stay
Crisis coping
Limit the consequences Recovery
and the existence of a motive. According to the definition of the World Tourism Organization and the United Nations, tourism should be understood as ‘the activities of persons travelling to and staying in places outside of their usual environment for not more than one consecutive year for leisure, business or other purposes’.
Diagram 11: The tourism system
Reverting to system-theoretic knowledge offers the most extensive portrayal of tourism possible, which is characterized, in particular, by interpersonal contact and numerous relations with the environment.
Thus, the company is defined as a productive social system that maintains relations with its environ- ment as an open structure. The different sections of the system are so much linked with one another
‘that no section is independent of the other sections and the behaviour of the whole is influenced by the combined effect of all sections’ (Ulrich and Probst, 1995). All elements outside of the company’s system belong to the environment, which can be subdivided into dimensions and institutions. Taking a dimensional view on the environment, it is possible to differentiate between ecological, technologi- cal, economic and social spheres. If need be, this can also be extended to the political-legal sphere.
Taking an institutional view on the environment, it is possible to separate institutions or groups from individuals, such as the state, customers, competitors, capital investors, suppliers and employees. As a subsystem of tourism, the tourism subject – the tourist – can be distinguished from the institutional subsystems ‘destination’, ‘tourism company’ and ‘tourism organization’ (see Diagram 11).
2.3.2.2 The tourism product
The tourism product is varied and complex and is often constructed with the cooperation of a num- ber of people and organizations. In tourism, even if those units that participate in service construction produce their own tourism products, according to predominant opinion, only the marketable service System-
theoretic
System Tourism Ecological
environment
Technological environment
Economic environment Social
environment Political
environment Tourism subject
Tourist Tourism
organization Inhabitants
Tourist office / CVB
(Tourist) police etc.
City council and administration
Trade and Business Tourism companies Tourismobject: Destination
bundle is understood as being the actual tourism product because the respective service parts are bare- ly saleable on their own (Kaspar, 1991; Doswell, 1998; Bieger, 2002).
Because, as with other service products, the tourism product is predominantly immaterial, this makes the service that is to be provided difficult to assess. This uncertainty increases due to the distance bet- ween the location of purchase and where the service is provided. Expressed in information-economic terms, the tourism product is a belief or trust product that demands that the supplier is able to reduce uncertainty and risk, above all, in relations with potential customers.
The tourism product on offer is often divided into an original and derived offer (Kaspar, 1991, Müller, Kramer and Krippendorf, 1991; Freyer, 1995).
Whilst natural factors, general infrastructure and social- cultural relationships, which characteristically have no direct relation to tourism, count towards the original offer, the derived offer incorporates factors that were knowingly created for the satisfaction of tourists’ needs, for example, the tourism infra- and superstructure.
Recently, it was urged that the tourism product and the consumer goods product are treated the same way as well as the product components, ‘original’ and
‘derived offer’, were extended by the ‘software’ part of the offer (WTO, 1994a; Bieger, 2002). Where original and derived offer refer to the hardware
characteristics of the product, software describes the so-called soft characteristics such as experience.
From the demand perspective, the product can be characterized, generally, as a number of features that are combined and allow one or more of a prospective client’s needs to be satisfied. By satisfying these needs, the product provides the consumer with a benefit. Building on the benefit gauge developed by Vershofen, which differentiates between basic benefits, that is, the material-technical side of a product, and additional benefits, that is, the emotional-spiritual side, Kotler (1984) developed three levels of the term ‘product’. He describes the first level as the core product that is the actual core service of the product, therefore, that ‘which the customer actually purchases’. The second level is the actual product that is identified by a unit understood by the customer as an object and that includes five characteristic features: quality standard, features, styling, brand name and packaging. Other services and advantages that accompany the product form a third level and describe the augmented product.
This system was transferred to services – service describes, amongst other things, a combination of factors such as living things, material goods and nominal goods – by Bruhn and Meffert (1995) and the material and immaterial components of the product were also divided into three levels. In its first level, the model describes the core product as a fundamental service or mandatory component called for by customers. In the next level, the quality product incorporates those elements that stand for services expected by the customer as fundamentally desired components. Both services together refer to the so-called basic benefit, which can, therefore, also contain immaterial components and can be further understood in terms used by Vershofen. Separated from this is the additional benefit that forms the final level and describes discretionary services. Whereas those services provided as basic benefits
Assessing Quality
Because quality can be checked, three kinds of goods can be distinguished:
• Search goods: product quality can be easily checked before purchase;
• Experience goods: checking is only possible on demand;
• Trust goods: impossible to acquire information due to prohibitive or high costs.
Source: Haedrich (1998a), Kaas (1990)
Basic benefits
Additional benefits
correspond to customer expectations, activities that create additional benefits are useful in product differentiation and, eventually, for the creation of competitive advantage.
Diagram 12: Basic and additional benefits of a flight service
Source: Adapted from Bruhn and Meffert (1995)
If this system is applied to basic tourism services, the core product describes, for example, overnight stay and catering services with regard to accommodation companies (the constitutive element is only the accommodation service itself that incorporates the granting of accommodation) or transport services as far as transport companies are concerned. Destinations can incorporate many types of core services of which swimming and golf are examples for activity-oriented holidays and cultural buildings or history are examples of core services for regional holidays.
In general, the majority of products on offer are so well developed that objective differences in quality are scarcely perceived by the customer. This dematerialization of consumption can also be observed in tourism. Even here a change towards a buyer’s market took place and the fulfilment of the ‘fundamental physical need to travel’ is already seen as a foregone conclusion (Kroeber-Riel, 1986; Haedrich, 1993;
Opaschowski, 1995; Kreilkamp, 1998). The objective functional quality of a product is a necessary, but by no means sufficient, prerequisite for market success. On the contrary, a product’s competitiveness is determined by its ability to impart consumption or holiday experience.
Reservation Flight schedules, transparency of Customer relationship supply, availability by phone management, own travel
agencies
Additional service Train or bus transport to the Combined flight and bus or train
before flight airport tickets, rental cars, hotel
reservations, decentralized check-in
Airport station Check-in and boarding, waiting Service quality, express check-in,
rooms club-service, ticket-machines
Flight Punctuality, security, regularity, Service quality, comfort, cleanness, flight information ecological material
Airport station Baggage claim, waiting rooms Service quality, rapidity of baggage claim
Combined flight and bus or train Additional service Train or bus transport from the tickets, rental car, hotel,
after flight airport apartments
Core Product Basic Benefits Additional Benefits
The experience value becomes, therefore, the focus of considerations. Defined by Weinberg and Konert (1985) as ‘...subjectively experienced through the product, the service, ...the contribution made to the consumer’s quality of life ...’, it conveys experiences that are embodied in the world of feeling and experience. Schulze (1996) uses the differentiation between interior-and exterior-oriented consumption to make the function of experience in today’s society clear. ‘If glasses are bought in order to see better, a car for transportation, flour as food, etc., this is exterior-oriented behaviour.’
Consequently, the quality of the product is not seen to be dependent on consumers because it concerns the product’s objective features. This is different, however, for interior orientation. ‘The interior- oriented consumer looks for glasses for which he already feels something, a car that fascinates him, a type of flour with which he can experience something: experience flour.’ Finally, he concludes that, nowadays, holiday travel is ‘called for exclusively due to interior-oriented motivation’.
Schrattenecker (1984) also addresses the issue of the strong influence that emotional criteria have on the selection process. Regarding the choice of destination, for example, she said: ‘It should be assumed that the formation of a preference or a choice between target countries does not take place on an exclusively rationalbasis, but, in fact, an emotional analysisof the countries, which is predominantly based on the complexity of the assessable object, also takes place: there is, therefore, both rational and emotional content. For example, emotional criteria such as ‘international flair’ and rational criteria such as ‘the existence of the opportunity to undertake water sports such as sailing, surfing and water skiing’ could be a decisive factor when choosing a target country. These criteria are not mutually exclusive but complement one another: both the one – emotional – and the other – objective offer – are looked for.’
This is expressed in more concrete terms by Fesenmeier and MacKay (1996) who refer to the considerable significance of this experience value in the initial phase of travel decision: ‘As such, destination decisions may be based on the symbolic elements of the destination (as conveyed in visual imagery) rather than the actual features.’
This quote makes it clear that the creation of competitive advantage within the sphere of core benefits is scarcely possible for the tourism product if the products are no longer unique and, as a result, their objective functional features are no longer discernible. If the two basic types of competitive advantage are used as a basis, the missing opportunity for material differentiation means that the choice remains between a cost leadership or immaterial differentiation strategy, which is also known as an experience value strategy. Bieger (2002) also confirms this: he regards only the possibility of software differentiation, under which he understands culture, systems, experiences, ambience and lifestyle, as useful for a destination with interchangeable resource getup, under which he subsumes capital, infrastructure and nature. Seen in the medium to long term, the emotional consumer experience provides a larger contribution to consumer quality of life in many markets, including the tourism market, than the basic actual and functional features of the product that are regarded as trivial.
Therefore, it is the task of strategic and operative marketing to generate, impart and maintain these additional benefits that decide the purchase decision. These new aspects are, at the same time, the particular challenge of the strategic crisis management.
Experience value