Internationalization, Innovation and Sustainability of MNCs in Latin America

L. Liberman, W. Newburry, L. Liberman, W. Newburry

• Publisher: Palgrave Macmillan
• Year: 2013
• Print ISBN:
  9781137024121
• eBook ISBN:
  9781137024138
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Presents research findings and theoretical developments in the International Business field, with special emphasis on the issues of internationalization, innovation and sustainability in Latin America.

1

Maintaining a Global Competitive Advantage: Sustainable Tourism in a World Heritage Site in Peru

James Patrick Johnson and Ronald M. Rivas

Introduction

Over the past 60 years, global tourism has expanded and diversified beyond the traditional destinations of Europe and North America, and has now become one of the fastest-growing sectors in the global economy (UNWTO, 2011a). The growth in tourism has been particularly marked in developing economies, where tourism is often a major contributor to national economic growth and development. International tourism in the Asia-Pacific region, for example, grew by 13% in 2010, while in South America, it grew by 15% in the first half of 2011 alone (UNWTO, 2011b). Within the global tourism industry, the fastest growth sector is cultural tourism, defined as “visits by persons from outside the host community motivated wholly or partly by interest in historical, artistic or scientific or lifestyle/heritage offerings of a community, region, group or institution” (Silberberg, 1995: 361). Heritage tourism is a subset of cultural tourism that focuses on the cultural heritage of a community or nation. It has been spurred by the growing number of United Nations Educational, Scientific and Cultural Organization (UNESCO) World Heritage Sites, which now include 725 cultural sites, 183 natural sites and 28 mixed properties in 153 of the 188 states that are party to the United Nations World Heritage Convention (UNESCO, 2011a). To be selected for the World Heritage Site list, the site must be of outstanding universal value and meet at least one out of ten selection criteria, such as representing “a masterpiece of human creative genius”, bearing “unique or exceptional testimony to a cultural tradition or to a civilization” that either currently exists or has disappeared, or containing “superlative natural phenomena or areas of exceptional natural beauty and aesthetic importance”. Sites that have met these criteria are wide ranging, and include Independence Hall in Philadelphia and the Statue of Liberty (United States), the Great Barrier Reef (Australia), the Great Wall of China, the Taj Mahal (India), Stonehenge (United Kingdom), and the historic sanctuary of Machu Picchu (Peru) (UNESCO, 2011b).

Since heritage tourists have limited resources for visiting these sites, there is both direct and indirect competition among the sites to attract foreign visitors. In this study, we apply the resource-based view of competitiveness (Barney, 1991, 1996) and institutional theory (Dacin, Goodstein & Scott, 2002; DiMaggio & Powell, 1983; Scott, 1995) to World Heritage Sites, using Machu Picchu as our focal heritage site, and argue that planning and managing for sustainability is central to the site’s continued global competitiveness. The centenary of the rediscovery of Machu Picchu in 1911 was recently celebrated, so a study of this wonder of the modern world, its place in the global tourism industry, and a competitive analysis of Machu Picchu at the firm level are both timely and relevant to academics and practitioners.

This study is organized as follows: first, we discuss the recent growth in global tourism and the importance of tourism to economic growth and development, especially in emerging markets. We then trace the development of heritage tourism and compare the growth in tourist numbers at three major world heritage sites: the Taj Mahal, Stonehenge, and Machu Picchu. Next, we review the RBV model of competitiveness and institutional theory and apply them to Machu Picchu as a tourist destination, and we then link the RBV model to a framework for sustainable tourism. Drawing upon the literature in sustainable tourism and applying a benchmarking tool for sustainable tourism, we assess the extent to which the management of Machu Picchu satisfies the criteria for sustainability. We discuss the achievements in sustainability attained to date, and we provide concrete suggestions for what still needs to be done, along with policy recommendations.

Global tourism and World Heritage Sites

Two major categories of tourism are domestic and international (or global). Since data for domestic tourism are often either unavailable or unreliable, we focus here on international tourism – that is, tourists who travel outside their country of residence. Advances in transportation and communications technology, along with greater disposable income and improved physical infrastructure in emerging markets, have resulted in a boom in international tourism in recent decades. International tourist arrivals have grown from 25 million in 1950 to 277 million in 1980, 435 million in 1990, 675 million in 2000, and 940 million in 2010 – a staggering 939% growth over 60 years – while the share of international arrivals in emerging markets has grown from 32% in 1990 to 47% in 2010 (UNWTO, 2011a). Whereas Europe and the Mexican Riviera were exotic destinations for US tourists in the 1950s and 1960s, today destinations that were once on a wish list of places to visit are now within the reach of travellers across the globe: local tour operators organize treks through the Andes and Amazon Basin for US and European gap-year students taking a year off for adventure travel before starting college, while Elder Hostels in the USA organizes cultural tourism expeditions for over-55s to explore Mayan ruins, Ancient Egypt or Tibet, or to visit the Masai tribes of Kenya. The growth and diversification of global tourism has resulted in its becoming one of the fastest-growing economic sectors in the global economy, equalling or surpassing growth in oil exports, food and automobiles (UNWTO, 2011c). It ranks as the world’s fourth-largest export category, and for many developing countries it is the primary source of foreign exchange, creating jobs and opportunities for economic development and accounting for 10% or more of GDP (UNWTO, 2011c).

Table 1.1 UNESCO World Heritage Sites by region, 2012

Source: http://whc.unesco.org/en/list/

Heritage tourism. Within the global tourism industry, the fastest growth sector is cultural heritage tourism (hereafter heritage tourism) (UNESCO, 2011c). The US Department of Commerce defines a heritage tourist as a traveller who has participated in a visit to a/an art gallery/museum, concert/play/musical, cultural heritage site, ethnic heritage site, American Indian community, historical place, or national park (US DoC, 2010). This broad definition suggests that there is an overlap between tourists who travel for other purposes – to visit family or friends, for a vacation, or even on business – and those who can be classified as heritage tourists. Clearly, one may fall into more than one category during a single overseas trip, just as a business visitor might fall into the category of “shopper” by purchasing a souvenir for her children. The growth in heritage tourism has been spurred by a number of factors, including the ever-growing number of UNESCO World Heritage Sites and by efforts to promote visits to them. Although the UNESCO list is dominated by sites in Europe and North America (48% – see Table 1.1), 127 sites (14% of the total) are in Latin America. Besides Machu Picchu, they include the Galápagos Islands, Manú National Park, Iguazú National Park, and the city of Brasilia. However, the centennial celebration of its rediscovery in 1911 has recently thrown a spotlight on Machu Picchu, resulting in an upsurge in the number of visitors between 2000 and 2010.

Table 1.2 Comparison of three World Heritage Sites

¹ Times of India (2011)

² ALVA (2011)

³ Stonehenge News & Information (2011)

⁴ Observatorio Turístico del Perú (2011)

Comparing Machu Picchu with two other well-known World Heritage Sites, the Taj Mahal and Stonehenge, it is evident that all three have seen a steady increase in the number of visitors over the past ten years: Taj Mahal – 140%; Stonehenge – 28%; Machu Picchu – 67% (see Table 1.2). In the case of the Taj Mahal, the increase has come predominantly from domestic tourists, who represented about 85% of the visitors in 2010, whereas domestic tourists account for less than 50% of the visitors to both Stonehenge and Machu Picchu. Both the Taj Mahal and Stonehenge are relatively accessible to tourists, the Taj Mahal more so since it can be accessed by car, bus or taxi, or on foot, from the city of Agra. Stonehenge, located in a lightly populated area 90 miles southwest of London, is difficult to reach by public transportation, but its location next to a major roadway makes it easily accessible by car or tourist bus. Furthermore, the official figures for Stonehenge probably underestimate the true number of sightseers, since many visitors choose to view the site from the roadway instead of paying an entrance fee. All three UNESCO sites face environmental threats from a combination of increased numbers of tourists and, in the case of the Taj Mahal and Stonehenge, from traffic congestion and industrial pollution. In 2010, Wanderlust magazine listed Stonehenge and Machu Picchu among the top ten most threatened wonders of the world (Wanderlust, 2010).

In the case of Machu Picchu, the remoteness and relative inaccessibility of its location make the increase in the number of visitors both impressive and alarming: impressive, because despite the difficulty of getting there, which involves either a five-hour trip each way by road/rail from the nearest airport at Cuzco, or a three-day trek by foot along the Inca Trail, foreign tourists are attracted in growing numbers to the mystique and grandeur of Machu Picchu; alarming, because the increase in tourist visitors has exacerbated natural erosion of the site and surrounding trails, while recent flooding along the Urubamba River valley severely damaged the railway leading to the town of Machu Picchu, leading to speculation that Machu Picchu might not be able to support even its current number of visitors (Tegel, 2011). However, before discussing the problems associated with maintaining this World Heritage Site, we examine why foreign tourists are attracted to Machu Picchu and, using the resource-based view of firm competitiveness and institutional theory, we review its resource-based advantages and examine potential threats to its competitive advantage.

The competitive advantage of Machu Picchu

Globalization has set the stage for increasing competition among hundreds of heritage sites as destinations for global tourists. In such a competitive landscape, heritage sites that stand out by their natural beauty or rich cultural past attract a larger number of tourists and the corresponding influx of revenues that countries covet. The unique endowment of a heritage site’s natural and/or cultural resources is clearly associated with its ability to compete with other sites, and such resources confer a competitive advantage on the site that possesses them in abundance.

Machu Picchu offers an interesting example to illustrate the resource-based competitive advantage of heritage sites. Because of its location, nestled at almost 8,000 feet between three sacred mountains, protected on three sides by steep cliffs and the fast-flowing Urubamba River and approached by a single well-guarded trail, Machu Picchu was a perfect location for constructing a retreat for Inca nobles. Built in the late fifteenth century, the complex of buildings is a prize example of Inca stone craftsmanship, town planning, architecture, hydrology, astronomical science, and community with nature. It was abandoned in the 1570s, after the last failed Inca uprising against the Spanish invaders, but it remained overgrown in the jungle and hidden to the outside world until it was rediscovered in 1911 by an American explorer, Hiram Bingham, who called it the “Lost City of the Incas”. It has attracted millions of visitors since then, and subsequent restorations and reconstructions have returned the complex to what it must have looked like in the mid-sixteenth century. In 2008, the number of foreign tourists peaked, at 616,000 (see Figure 1.1); today, Machu Picchu is the number one tourist site in Peru and the largest single generator of income from tourism. Tourism is the primary industry for the population of the Urubamba River valley.

Figure 1.1 Number of domestic and foreign visitors to Machu Picchu,...

Table of contents

• Cover
• Title Page
• Introduction
• 1 Maintaining a Global Competitive Advantage: Sustainable Tourism in a World Heritage Site in Peru
• 2 Foreign Direct Investment in the Water Sector in Latin America
• 3 Absorptive Capacity in the Franchising System: Empirical and Comparative Dimensions from Brazil
• 4 Brazilian Franchising Networks: Degree of Internationalization and Current Status
• 5 Private Equity Investments in Emerging Markets, National Governance, and Geographic Distance: The Case of Latin America, 1996–2009
• 6 The Internationalization of Brazilian Fast-Food Chains: A Marketing Failure?
• 7 Challenges in Strategy and Management of Multinational R&D Centres in Emerging Markets: Perspective from a German Headquarters in the Chemical Sector
• 8 Internationalization of Asian MNCs in Brazil: Factors and Motivations
• Index