The significance of small and medium-sized entrepreneurship in tourism of the European union and Croatia.

Grgona, Jadranko

Abstract: Due to tapering of market business conditions in tourism, mostly as a result of global tendencies, many countries, including EU, focus exclusive attention to strategic entrepreneurship, encouraging its lunge with various measures of tourism and general economy policies. However, tourism is, not only in EU members, but also in other countries, facing with the process of serious restructuring. More emphasize is put on business spirit, creativity and innovation as a precondition of survival and development of small and medium-sized entrepreneurship. Croatian post war tourism development was characterized by forcing big hotels and resorts capacities, mostly as a result of dominant orientation on mass traffic.

Keywords: strategic entrepreneurship, tourism industry, SME, transition.

1. INTRODUCTION

Based on the experience gained over the past decade, we learned that stable currency, balanced budget and current account, liberalization in foreign trade and strong private sector are by no means guarantors of stable growth unless they are supported by relevant institutional solutions. We should note that the transition is not an end in itself, but rather the fundamental means of the development policy since only changes resulting in sustainable development are worthwhile. The liberalization of foreign trade and privatization are not goals, but merely methods to be utilized, bearing in mind that solutions applicable to developed markets do not function in economies in transition. The real problem lies more in the question of how a country in transition can reach its desired goal (EU level), rather than understanding the way the market works. Because of it and the process of the construction of market institutions, the development and the application of strategies is an absolute must. Such strategies, with regard to Croatia, should primarily involve planning the development of core industries which will be leaders in this process. Such industry in Croatia is definitely tourism. Currently, major part of tourism assets in Croatia are owned by state (about 60%), and owners structure is fragmented. Deficit of smaller, family capacities is still felt, although last year their number has been increasing. Changes are necessary because they ensure economy growth and new workplaces, encouraging entrepreneurships climate and entrepreneurships culture. Studies conducted by the Ministry of Tourism show that Croatian tourism industry has been the most burdened in Europe in fiscal terms, especially in comparison with competing Mediterranean countries. Various aspects of tourism require specific types of services. This makes a well-trained, prepared and organized staff a prerequisite for creativity in placement, promotion and delivery of services in tourism. Because working with people from different cultures and social walks of life is an important aspect of tourism, expertly trained staffs, with a good command of general knowledge and proficiency in major languages, are a must. The quality of tourist services is dependent on many factors. These may be divided into two main groups: a) human and b) technical and technological factors. Their influences are distinct, and a product or service, the quality of which would be dependent on only one of the above mentioned factors, is almost impossible to find. Since the human factor plays a decisive role in ensuring the quality of services, special attention needs to be paid to the selection of the staff, and their expertise, knowledge and capabilities (Senecic & Grgona, 2006). When taking into consideration that the tourist product is rendered in direct person-to-person contact (the guest and the host), the host is the one who is highlighted since he/she is often the cause of the tourist's discontent. It is clear that the behaviour of the tourism staff may well result in a tourist's decision not to return to the destination, and the loss of potential guests. This is why the relationship between the service-provider and service-user is exceptionally important. The buyers-users of services expect appropriate behaviour on the part of the service provider, e.g. hospitality, kindness, cooperativeness, patience, exemplary conduct and similar (Grgona, 2003). Each service-user makes an assessment of the service-provider with whom he/she made contact. In tourism, in addition to the assessment of services, the product is assessed as well. Only through an improvement of quality, it is possible to decrease the existing gap between Croatia and developed tourist countries in terms of organization, management, technology, marketing and even education.

2. ACTUAL SITUATION IN SME IN EU COUNTRIES AND CROATIA

Recent facts show that Croatia is placed 22nd among world's tourist destinations by the number of tourist arrival (The Economist, 2006). According to the data from Croatian Central Bureau of Statistics, 10 millions of tourists visited Croatia in 2006. Individual arrivals represent 2/3 of that number, while previously arranged arrivals represent 1/3 of all visitors. According to the strategic determinants of the development of Croatian tourism, Ministry of the Sea, Tourism, Transport and Development offers subventions and stimulations, especially in the development of tourist undeveloped districts. Competent Ministry has issues the program Stimulation for success, which for the first time gives small and medium-sized enterprises the real chance that under stimulant financial conditions enter the system of construction and completion of the family hotels and pensions and enrich our tourist capacity supply, but also to bring more creativity, authenticity, recognizable stile and spirit. If we know that in this segment of supply we have real basis of 400.000 beds, which is significantly higher than hotel capacities, the calculation is clear. These capacities are today used only 30-35 days a year. Prolongation of the season by two times, which should not be difficult to achieve, opens completely new types of supply, and what is important, the demand. Moreover, small and medium-sized enterprises despite their adaptability show enviable elastic towards seasonal traffic oscillations relevant for economics of business operations (costs, workforce etc.). Furthermore, tourist services are territorially, temporally and functionally connected contrary to industrial ones; they are of personal character and are realized in direct contact with the consumers--tourists. That is one more reason for advantage of small and medium enterprises towards large ones, which despite that, show recognizable tendency of further concentration. Category of small and medium-sized entrepreneurship in tourism includes capacities in: hotels and similar objects, campsites, restaurants, bars, canteens and likewise, travel agencies and tourist operators. Of course, part of these capacities, except tourists, serves local residents, users excluded from tourist statistics. Globally, from all registered small and medium-sized enterprises, not only in catering and agencies, most of them (92%) refer to very small, with less or equal to 10 employees. Although small and medium-sized enterprises make only 7.4% of that group in western, and 11.4% in middle and Eastern Europe, these are only apparently, small sizes. Concerning the significance of small and medium-sized entrepreneurship in catering and tourist agencies in EU, union members are well aware of the fact that success of that sector depends on small and medium-sized entrepreneurship. On the trace of above mentioned thinking, we will mention some recommendations which, in 1998 on the conference in Wales, brought team of EU experts (AGENDA 2010, 1998). Shortly, as illustration of dominant thinking, the following is suggested:

* better understanding of small and medium-sized entrepreneurship,

* stimulation of sustainable growth,

* development and stimulation of information technology,

* developing marketing of quality products,

* financial sector support,

* improvement of fiscal and other regulations,

* improvement of the relationship with large organizations in tourism,

* development of education and training in the sector of small and medium-sized enterprises,

* improvement of the research and statistics about small and medium-sized entrepreneurship.

Concerning that approach, interest for research of yield management (profitability management) was stimulated in small and medium-sized enterprises from this domain. That proves detailed study about these issues, issued by the Commission as executive EU body, i.e. her Main direction XXIII. New discipline, not yet well known, is being developed. In the study, among the others, main instruments that EU recommends to her members are being mentioned, and which EU uses through intermediation of her funds. Contrary to most developed tourist countries, especially "classical", which are traditionally rely on high density network of small, mostly family objects, in Croatia concept of so called "hotel self sufficiency" was dominant. Starting the restructuring process is not possible without true privatization under conditions of serious difficulties in which numerous large hotel complexes are laden with cumulated losses and credit debts. Average size hotel in EU has 50 beds, while the indicator varies for different members from 23 in Great Britain, 34 in Germany, 38 in Luxembourg, 101 in Spain, 106 in Portugal to 170 in Denmark (EU Commission, 1997). In Croatia this average goes to 300 beds per objects, which speaks enough for itself. Despite that, ratio of basic and supplementary capacities compared with competitive receptive countries is often expressed as one more weakness of the supply structure. Noting the difficulties, some authors tried to implement SWOT analysis for small and medium-sized vacation type hotels, concluding that their strength is in previously mentioned adaptability, possibility of fast decision-making process of business decisions and family inclusion. Weaknesses are in the domain of service placement, i.e. marketing, as a consequence of corresponding market information, promotion, cooperation and especially intermediate agencies. That makes them dependent on tourist operators, making them accept unfavourable conditions, e.g. allotment prices etc. Meantime, serious signal of stronger EU opening towards Croatia were launched, and they had positive effect on small and medium-sized entrepreneurship in the country.

3. CONCLUSION

The analyses of developments of Croatian tourism industry in the period of 1996-2005 quotes us on the conclusion that the most significantly potential lies in SMEs. The results of different indicators have shown their growth. But this growth is still not satisfactory. The revolution of new kind of tourists with higher level of knowledge and empowerment, better transportation solutions and accommodation models forces the Croatian SMEs in tourism industry to give up from the traditional business paradigms. If Croatian SMEs intend to play important role in market games on European tourism markets they need to join the world trends and use all modern business methods. Therefore it can be expected the growth of the level of usage of networking in Croatian SMEs what will give them the opportunity for efficiency increase and the improvement of competitive position also on the global market. The cluster concept points out that the success of individual SMEs does not depend only on their own activities and their own supply chains but already also on the activities of connected organizations. In the practice of developed countries the application of strategic linking and networking in tourism industry has already reached the significant level, and has a tendency of further growth. The implementation of this new business models and strategies will help Croatian producers in tourism industry with the answer how to adjust their SMEs to the newly risen circumstances. A lot of efforts to change the managerial attitudes of benefit of networking and forming clusters of Croatian small and medium-sized tourist providers are given. As this is the only way to be competitive with the large European competitors, no Croatian SMEs in tourism industry can afford to ignore the use of these new business models in their competitive strategy.

4. REFERENCES

Senecic, J., Grgona, J. (2006). Marketing Management in Tourism, Mikrorad, Zagreb

Grgona, J. (2003). Image of a Tourist Destination: A Contribution to a Scientific Debate, ACTA TURISTICA, Ekonomski fakultet Zagreb, Vol.15

Pocket World in Figures (2006). The Economist, London Conference about small and medium-sized entrepreneurship held over EU sponsorship in May 1998 in Wales under the name AGENDA 2010.

Study "Yield Management in Small and Medium-Sized Enterprises in Tourism Industry" (European Commission, 1997), and many others issued by the EU, uses term tourism industry referring to catering and travel agencies.