Social Enterprise in Tourism Industry for Business Sustainability under Thailand 4.0 Roadmap

Chalermporn Siriwichai, PhD*, Ariyaporn Nunthiphatprueksa, Nethchanok Riddhagni, Sudawadee Chanpiwat, PhD

Silpakorn University International College

Abstract

Thailand government has launched a new roadmap called Thailand 4.0, that referring to the country development based on innovation and technology with the concept of Value-Based Economy. Since Thailand has been evolved from agricultural base in the level 1.0 to light-industry base of the level 2.0, then expand to heavy-industry base as the level of 3.0. This leveling-up to 4.0 is anticipated to undergone the trap of middle-income country for many decades even before the political instability. One of the key elements driving this plan is the smart enterprise. It should be less dependent on the government support and more creative to employ technology and innovation to develop a strong foundation of sustainable business. Nevertheless, Thailand businesses and industries have been mainly profit-oriented and devoured flourish resources without well-rounded consideration towards society, economy, and environment. Travel and tourism industry had a contribution to GDP in 2016 for 20.6% and expected to grow higher in 2017. It is an example of service industry, which needs to gear-up from level 2.0 to 4.0. However, tourism industry is susceptible to political-economic, social, and environmental changes. This study aims to focus on supportive and challenging factors affecting community-based and social enterprises in tourism industry. Embracing social enterprise concept, whether or not, can be tantamount to a smart enterprise that can potentially support Thailand economy.

Keywords: business, sustainability, social enterprise, Thailand 4.0 roadmap, tourism

*Respondent author contact: siriwichai_c@silpakorn.eduIntroduction

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The concept of value-based economy (Skarzynski & Gibson 2008; Gibson 2009; Maesincee 2016) or innovation-based economy is adopted by Thai government recently. It was not scholastically confirmed that Thailand context referred to the industrial revolution age 4.0, which comprised with five major technologies; ‘internet of things, big data, artificial intelligence (AI) , simulation and 3D printing, and cloud computing (Luankeaw, 2017).’ Since Thailand has been long for a further advance development in economy and wishfully forefront country in Southeast Asia region, the new policies based on the mentioned concepts are included as the theme of the National Economic and Social Development Plan No.12 (2017-2021) of Thailand (Office of The National Economic and Social Development Board, 2016). Although the World Bank announced that Thailand was upgraded from lower middle-income economy to be an upper-middle income economy in 2011 (The World Bank, 2011), Thai economy is still fluctuating against the political waves throughout this half decade and still cannot be elevated to a high income economy country. Under the pressures of political atmospheres and negative numbers of exports and foreign direct investment (FDI), Thai government needs to push forward policies to prove that they can maintain the political stability, improve the social situation, and uplift the economic stagnation.

The road map of Thailand economy 4.0 has multiple layers and collaborations from private and academic partnership to create ‘smart’ concept to target industries based on the application of technology and innovation. Major target areas cover agricultural entrepreneurship, tourism business owner, Startup, Small-medium enterprise (SME), and social enterprise. They are from not only farming, manufacturing but also service industries. Any business, completing digitalization and value-based economy criteria, will be named as the ‘smart enterprise.’ Certainly, there are also smart farmer, smart entrepreneur, and smart SME to call whoever engaging in either technology or innovation to increase productivity, lower the cost, support local community development, and preserve the environmental responsibility. The government encourages all those primary industries and businesses to enhance the level of economic activities by engaging in technology and innovation. By using the prefix- smart to any enterprise, entrepreneur, business owner, or Startup, they may be inspired to create the sustainable business for a long term. However, the application of technology and innovation is quite easier said than done. Technology is quite straight forward. It brings up multiple fields of science in making the communication, operation, production, and transportation became faster at lower costs as well as environmental friendliness. Innovation is far more complex than that. Unlike invention, innovation refers to a core competency apart from marketing of any business (Drucker, 1984), a stimulation of socio-cultural changes (Mulgan, 2006), and a source of environmental impact (Porter & Kramer, 2011). Hence, innovation has a wide range of ideas, knowledge integration, and cumulative technology responding to the needs of marketplace developments. Nowadays, product and service are interchangeable and interdependent despite some different characteristics. Creating a smart enterprise in product or commodity has a clearer evaluation of business sustainability, meanwhile in service industry is more perplex because of its intangibility and other characteristics. When it comes to service industry, tourism is always listed as the most crucial one in Thailand regardless of the low contribution to GDP at 20.6% in 2016 (WTTC, 2017) including hotel, accommodations, restaurant, leisure activities, Meeting Convention Incentive Exhibition (MICE) industry, and other related products. In order to achieve smart enterprise in tourism industry, it needs to identify the supportive factors as well as decrease challenges or prevent threats at the foundation level of business in tourism industry such as community-based enterprise and social enterprise.

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Even though tourism development was primarily focus on the economic benefits, the people in the tourism community also concerned on the negative impacts on society, culture, and environment (Yoon, Gursoy, & Chen, 2001). As a result, a smart enterprise in tourism, or in product manufacturing, for Thailand 4.0 roadmap should be able to not only sustain the business based on the use of technology and innovation but in the meantime also contribute to the economic growth, invigorate socio-cultural community, and practice environmental accountability. The desired characteristics are more or less close to the essentials of social enterprise. In consequence, this paper has two major objectives. First, it intends to identify factors that could be supportive and challenging the smart enterprise in the context of Thailand 4.0 by focusing on community-based and social enterprises in tourism industry. Second, it aims to find out whether social enterprise can be equivalent to a smart enterprise that Thai government expecting to potentially support the country’s economy.

Review of Literature

Community based-enterprise of tourism industry under the value-based economy

Defining the community-based enterprise (CBE) literally may directly focus on the word ‘community,’ but the enterprise found by the people in the community is not an only main characteristic of CBE. Manyara and Jones (2007) conducted a study on CBE in tourism in Kenya and suggested that “the working definition of a CBE is a sustainable, community-owned and community-based tourism initiative that enhances conservation and in which the local community is fully involved throughout its development and management and are the main beneficiaries through community development”(p.637). They also found that most CBEs had interventions from external parties from both public and private institutions mainly to drive implementation and financial funding. CBEs arise from the combinations of factors such as “(1) economic crisis and a lack of individual opportunity, (2) the processes of social disintegration, (3) social alienation of a community or subgroup from mainstream society, (4) environmental degradation, (5) postwar reconstruction, and (6) volatility of large business” (Peredo & Chrisman, 2006, p.316). CBEs in tourism have also been ascended mainly because of the motivation of economic and social development as well as environmental preservation in some cases. Local people in the community need to initiate bottom-up to identify the opportunity in creating tourism enterprise for their benefits. According to the study on ten Equator Initiative projects of CBEs to reduce poverty and conserve biodiversity, Seixas and Berkes (2010) found that in general most successful CBEs had approximately 10-15 partners from local, regional and international NGOs, donor agencies, less commonly national governments and other organizations, such as universities and research centres (p.183). Soviana (2015b) conducted a case-study method on 34 cases in CBEs in agriculture, forestry, and tourism sectors from 12 countries to identify the factors influencing on the CBEs’ success and aligned with the study of Manyara and Jones (2007) and Seixas and Berkes (2010) that almost all CBEs were involved with governmental supports and, both international and local, NGOs. The results revealed that members in the community participating in CBE because they possess essential local skills that bring economic, social, and environmental enhancements. However, it varied widely from case to case to measure the business sustainability (p.82).

In Australia, regardless of complexity in identifying success factors from various scholars, the government emphasized that key success factors for CBEs were access to finance, access to financial and business advice and support, reality testing business ideas, financial literacy

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training, networks and partnerships where culture is embedded, having a good governance and strong community participation (Morly, 2014, pp.6-11). In Thailand, at the end of June 2017, there are 83,613 registered CBEs abided by Community Enterprise Promotion Act, B.E. 2548 (2005) nationwide with 743 CBEs offering tourism in their communities (Ministry of Social Development and Human Security, 2017). Thai CBEs were established primarily to reduce poverty in the poor villages based on the possible determining variables such as material deprivation, access to basic needs, empowerment, vulnerability, social deprivation, and powerlessness (Teerakul, Villano, Wood, & Mounter, 2010, pp.3, 10). Sirikudta (2014) studied on the guideline for business sustainability in community-based enterprises in the case of processed tamarind, that were “(1) developing product quality and creating new types of goods, (2) raising both new and existing product standards accredited by Food and Drug Administration and Thai Industrial Standards, (3) training on knowledge and understanding in administration, (4) consistent standard of recipe, (5) having clear market positioning and creating website of product network, (6) establishing accounting and finance system” (pp.156, 162).

The situations of CBEs in tourism industry are also alike in most perspectives referring to the previous major studies. For instance, a research by Kontogeorgopoulos (2005) about community enterprises in Ao Panya, Phuket province, which studied on the strengths and weaknesses of community enterprises for eco-tourism, revealed that community-based enterprises should be continuously supported and developed from the grassroots level as a core of sustainable tourism development. It should also be properly promoted in the long run in order to create economic value and environment awareness. However, the term value-based economy applied by community-based is rather new to the local communities in terms of technological and innovative applications in leading to successful CBEs despite of the infrastructure and knowledge-transfer deprivation. Early this year in February 2017, the government arranged a board meeting of community-based enterprise 1/2017 and announced that from more than 80,000 CBEs around 30,000 CBEs were in the process of withdrawing and cancelling registration out of the system. The rest of them including OTOP (One Tambol One Product), which were mainly in agricultural, livestock, and processed food productions, would be upgraded to Small and Medium Enterprises (SMEs) to boost economic values for the country (Secretariat of the Prime Minister, 2017). As a result, there is a question of how the value-based economy of Thailand 4.0 roadmap can support business sustainability in tourism community-based enterprises when the current environment and supportive factors are uncertain.

Social enterprise in tourism industry: a contribution to economic growth

It is widely accepted from many studies on tourism businesses own by individuals in various sizes of organizations that their collaborations with local communities, including sourcing raw materials, tour guides training, tourism manpower, health care services, and education, can raise economic well-being to underdeveloped places (Ashley, Brine, Lehr, & Wilde, 2007). The term social enterprise is used confusingly and interchangeably with social entrepreneurship which is more emphasizing on the individual’s characteristics, vision of change, legal entity, and action of solution on social problems (Galera & Borzaga, 2009). Social enterprise is simply understood as an organization or a firm that thrives to tackle social problems, support people in the communities, have environmental preservation, meanwhile practice business to sustain in the marketplace (Gabatan, 2017). “The shared conception of enterprises as organizations promoting the exclusive interests of their owners is questioned by the emergence of enterprises supplying general-interest services and goods in which profit

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maximization is no longer an essential condition”(Galera & Borzaga, 2009, p. 225). Nonetheless, Wallace (2005), one of social enterprise practitioners, conducted a research on community-based social entrepreneurs (CBSE) on an estate in East London via four social enterprise practitioners with meta-narrative method and argued that it was not as idealistic rhetoric on social enterprise that business can be financially sustainable while supporting sustainable communities especially on the locations of unfavourable community. Today social enterprise is viewed as a profitable form of business venture and becomes popular in United States and United Kingdom where the government has a close monitoring and strict regulations to support successful social enterprises (Cho, 2017). Social enterprise has multiple abilities in generating positive social impacts, encouraging collective well-being conditions, which involving with economic, social, and environmental dimensions (Piccotti, 2017).

The cases of social enterprise in tourism industry may be rare or not extensively revealed in academic papers directly. However, there is an interesting research paper done by Piccotti (2017), which used a qualitative empirical study based on an analysis of the experience of various social cooperatives in Italy on the three projects of three different fields; renewable energy sources (1,000 Solar Roofs project) , tourism (Le Mat Social Franchising network), agriculture on the usage of assets confiscated from the Mafia (The Libera Terra project ), shows that social enterprise can employ innovation in contributing to the economic growth of the community and ultimately the country. In fact, Le Mat is not only the first initiative of social enterprise in tourism, but also a network of social enterprises in Italy and Sweden. “It is an innovative model of aggregation, organization and management of the enterprise network, based on the franchising system, in which all players involved share the same principles, quality standards and management models” (Piccotti, 2017, p.239).

Influencing factors of the business sustainability in tourism

A recent study on social innovation success factors on hospitality and tourism social enterprises, using an inductive comparative case study, conducted by Alegre & Berbegal-Mirabent (2016) suggested three major supporting factors and two additional factors backing to firm’s success. The three major factors are value proposition, proper market research, and stakeholder involvement along with augmented factors; such as pressures of social need and managerial trust on employees (p. 1155). This research was an example of companies trying to overcome the economic calamity by generating a business model innovation in Barcelona, Spain. Weppen & Cochrane (2012) employed the seven-model framework of social enterprise of Alter (2006), which are Entrepreneur Support Model (ESM); Market Intermediary Model (MIM); Employment Model (EM); Fee-For-Service Model (FFSM); market linkage model (MLM; service subsidisation model (SSM); and organisational support model (OSM) (p.499), on the selected successful enterprises to investigate social enterprise models in tourism and find critical determinants of success and challenge factors (p.508). They found that success factors were the combinations of awareness of marketing conditions, strong leadership supporting corporate culture and growth, strategy, organizational culture, and balance of all financial, social, and environmental goals. Moreover, SSM was the most popular and suitable for tourism organisations with a connection of social drivers and business practices. Accommodation and lodging providers prefer EM, while tour operators prefer MIM. Although there were many determinants supporting to the success of social enterprise, authors also identified challenges hindered progress of social businesses, such as financial viability with mission outcomes and lack of research into other firms (p.509).

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On the other hand, another comprehensive study on the projection of tourism enterprise in the next twenty years was conducted Postma, Cavagnaro, and Spruyt (2017). They proposed a framework as a guideline for business sustainability in tourism management in year 2040 through expert consultation. Their framework was made by incorporating three core values of economy, society, and environment into business strategic considerations. The projection was matched between the two complex variables; one was the possible scenarios in 2040 as Back to the 1970s; Captured in fear; Unique in the world; and Shoulders to the wheel, and the other was the DNA profiles of tourist businesses divided by colour code of Red, Yellow, Green,and Blue.

Figure 1. Future points for achieving competitive advantage in relation to sustainability, for four DNA profiles within the context of four scenarios for a sustainable tourism industry in 2040Source: Postma et al. (2017, p.20)

According to Figure 1., most scenarios have innovation or technology incorporated with business activities or strategic models. It is obvious that no innovation in the case of Captured in fear scenario, explaining the situation of no economic developments and in consequence stop technological progression, and jeopardize ecosystem, on any DNA profile of firms. The rest of scenarios depend on the external factors and organizational culture defined as DNA profiles that yield multiple levels of business competitive advantage relating to sustainability.

Methodology

This study employs thematic and narrative literature reviews (Creative Commons Attribution 4.0 2016; Grant & Booth 2009). There are many sources of data collection used to include in the findings, such as library online catalogue, Google Scholar, Science Direct, Scopus, Proquest, Sage, Ebcohost, SpringerLink, Routledge Taylor and Francis, SSRN, Emerald insight with key criteria of inclusion and exclusion. Articles and research papers are included when they discussed on the associated key words, statistics, and explanations, meanwhile excluded literatures are not in English or Thai languages and relevant to the research questions. It also applies deductive method (Hak & Dul, 2009) to relate theory to the case study (Yin, 2009) and explain the findings.

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Finding

Since social enterprise becomes more market driven (Thomson & Dohert, 2006; Dart, 2004 in cited by Soviana, 2015a, p.4) by applying entrepreneurial dynamics for social purposes (Borzaga & Defourny, 2001 in cited by Soviana, 2015a, p.4), a clear implication in tourism may overlapped with social entrepreneurship. There is less if any scholastic paper or case study in research theme on exact expression on social enterprise in tourism industry especially with the application of technology and innovation. However, a social enterprise in tourism in Thailand was found in hospitality businesses following two years after the initiative of Seedling Hoi An - destination resort in Vietnam (Laguna Phuket opens first social enterprise restaurant,” 2015), which was the first social enterprise restaurant launched by Laguna Lăng Cô under Banyan Tree’s group-wide mentorship programme in 2013 with the aim to provide training and job opportunities for underprivileged local youths (“Seedlings – Social Enterprise Restaurant’s Opening,” 2015). Laguna Resorts & Hotels PLC in collaboration with Banyan Tree and Angsana for the training implementation based on the curriculum discussion and ratification by Prince of Songkla University, Phuket Campus, managed the first social enterprise restaurant named ‘Seedlings Phuket.’ Later in April 2016, in accordance with the new economic theme - Pracharath Raksamakki (Unity of ‘People’s State’) of government’s policy on Thailand social enterprise, Interior Minister of Thailand opened the ceremony to launch Phuket as the first social enterprise under committees led by Phuket Governor Chamroen Tipyapongtada and Thapana Siriwatnaphakdee Managing Director of Thai Beverage Co., Ltd (Naknakhon, 2016). The project aims to improve local economies of the communities in remote areas focusing on three fields, such as agriculture, transformation and tourism since Phuket has many agricultural products and service businesses related to tourism.

Although Thailand has just obtained the concept of social enterprise and smart enterprise, there are evidences that Thai government may pursue the success from both of them. The presentation made by Vongkusolkit (2016) identified seven drives for the new government policy – Pracharat as; (1) innovation and Productivity Enhancement, (2) SMEs & Startup Promotion, (3) tourism and MICE promotion, (4) export and outbound investment promotion, (5) new S-Curve development, (6) modern agriculture / farming promotion, and (7) revenue generation and spending acceleration (p.3) as shown in Figure 2.

Figure 2. Objectives of Public Private Collaborative CommitteeSource: Vongkusolkit, I. (2016, August 31), page 3.

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This 38-page document also reveals that the government intends to support community-based enterprise and social enterprise along with Startups and settled large organization in reducing poverty and inequality, increasing country’s competitiveness, and increase economic value through research and development system as shown in Figure 3.

Figure 3. Objectives to boost innovation and productivitySource: same author, page 10.

Regarding to the project presentation made by the Chairman of the Thai Chamber of Commerce and Head of Public-Private Collaborative Committee in Figure 4., the government aims to achieve the rise of GDP of SME to 50%, increasing SME’s export value by 5%, and encourage to have 50,000 new SMEs per annum. These ambitious objectives are deprived from three separated groups of implementing projects, such as for SME, Startup/International Development Enterprise (IDE), and Social Enterprise. There are four major action plans of SE, which are support local economy by community-based tourism, SE marketplace, SE facilitation Services, and SE funding.

Figure 4. SME – Startup - SESource: same author, page 12.

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Regards to the study of Alegre & Berbegal-Mirabent (2016), SE marketplace project can be relevant to the factor of proper market research, SE facilitation Services can relate to the factor of value proposition, and support local economy by community-based tourism projects, started from Phuket following by other four provinces; Pethaburi; Udon Thani; Chiang Mai and Buriraum (Vongkusolkit , 2016, p.34), can be compatible with the key success in stakeholder involvement as the case of Phuket’s Laguna Phuket and social enterprise launched in 2016.

Conclusion

As Thailand thrives to escape from the economic stagnation based on the political situation, the new policy so called Thailand 4.0 road map is introduced and discussed widely on the implication and application in various industries. This study attempts to examine the potential supportive and challenging aspects that can reflect to the policy strategic planning. With the theme of Pracharath Raksamakki, an official social enterprise in Phuket initiative was launched to reveal the progress of the government’s action in approaching to the economic improvement goals. The plan includes three forms of grassroots’ enterprises; such as Small Medium Enterprise, Startup/IDE, and Social Enterprise as key parties to obtain supports from the public private partnership and government office. This research found previous studies proposed various perspectives of community-based enterprise, social enterprise, and some cooperative models for local community’s business sustainability. For instance, Soviana (2015a) mentioned in the study of those above forms of enterprise that can be applied successfully in one case but not appropriate in other case due to the dissimilar conditions of each geography and community. Therefore, Thai government may use these overlapping concepts to generate conglomerate action schemes covering these three forms of business ventures. This paper reviewed major studies on social enterprise, the contribution to economy, and key success factors and challenges that may appear as hindrance to business sustainability. Findings reveal only the action plans that may cause to the success factors of social enterprise in general but not specific to each primary field, such as agriculture, transformation, and tourism. Besides, there is no evidence of prevention on the pressure from social needs and managerial trusts on employee in the current policy documents, which may exist in some other disclosure literatures or not be carefully designed. According to the previous studies, key success factors for social enterprise in tourism or service industry are predominantly value proposition, proper market research, stakeholder involvement, while pressures of social need and managerial trust on employees should also be included for overall consideration. Furthermore, the suggest of success factors can derive from the combinations of marketing conditions awareness, strong leadership of social entrepreneur in the venture, a supporting strategy to the progress of business, organizational culture, and the balance of all financial, social, and environmental purposes. Meanwhile, challenges are the lack of financial feasibility to the company mission consequences and short-sighted in competition observing. In addition to the two challenges, this study found that the possible scenarios emerged from the insecurity or indecision in any tourism enterprise can affect heavily on the developments of technology and innovation as well as economic value expansion. Lastly, the social enterprise concept can be compatible to the scheme of building smart enterprises in Thailand 4.0 road map according to the plan offered by the Thai Chamber of Commerce aiming for sustainable business development with lesser depend on the government and create economic well-being to the local community.

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Recommendation for further study

Since this paper used previous studies as secondary data in exploring concerning information and data analysis from that may not cover many cases of Thailand social enterprise in tourism industry. In order to enhance the explanation in Thailand perspectives, the future studies shall organize in accumulating additional primary data in quantitative and qualitative methods. An inductive approach based on ground theories is highly recommended. Sample sizes may not large on the numbers of social enterprises but it can also be designed to collect data from residents in tourism areas in various geographies, owners from different sizes of the companies, and participated NGOs or crucial partners in financial sector.

Acknowledgement

The paper is a work-in-progress part of research project funded by Silpakorn University International College (SUIC). Authors are truly appreciated to all provision from SUIC board of management.

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