FACULTY OF ARTS AND SOCIAL SCIENCE

MSc. ECONOMICS AND FINANCE

SECOND YEAR, SECOND SEMESTER.

SUPERVISOR: DR. MAMUDU DAFFAY

REGISTRATION NO: 203080198
RESEARCH SUBMISSION RESEARCH PROPOSAL

RESEARCH TITLE:

THE CONTRIBUTION OF BUSINESS COMPETITION IN THE HOSPITALITY SECTOR

OF THE TOURISM INDUSTRY TOWARDS UN EMPLOYMENT REDUCTION IN PAJE
VILLAGE IN ZANZIBAR.

By: Omari Mohamed Omari:

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CHAPTER ONE

1.0 Introduction
One among the challenges facing the Developing country specific Zanzibar is slow economic

growth as well as the burden of the un employment especially in rural areas.

This study is mainly focus on the analyzing the contribution of of business competition in the

hospitality sector of the Tourism industry towards un employment reduction in Paje village

of Zanzibar. The rationale behind the study rises from increased competition in the industry

that adversely affects the labour market in Zanzibar specifically Paje village. Since 1990s

competition has intensified. While there are likely employment effects from the intensified

competition, there is lack of adequate knowledge about employment effect of such

competition. This dissertation is an attempt to contribute knowledge in this area.

1.1 Background of the study

Zanzibar, which is a part of the United Republic of Tanzania, consists of two main islands

namely Unguja and Pemba and about 50 other small islands. The islands are located 40km off

the Mainland coast of East Africa in the Indian Ocean between latitude 5 and 6 degrees South

and longitudes 39.5 and 40 degrees East. The two main islands are 50km apart separated by

the 700 meter deep Pemba channel. The total surface area of the islands of Zanzibar is 2,654

square kilometers; Unguja is the larger of the two main islands has an area of 1,666 square

kilometers, while Pemba has an area of 988 square kilometers. The 1988 census indicated that

the total population of Zanzibar was 640,685. The population has risen to 984,531 in year

2002. The population growth rate between 1988 and 2002 is 3.1 percent. It assumed population

of Zanzibar reached 1.57 million in the year 2011with a population growth rate of 3.1 percent

per annum (ZTA 2011).

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Socio-cultural formation in Zanzibar is a reflection of its contacts with foreign nationalities.

Through trade relations Zanzibar has integrated African Culture with those of Asia and Europe.

The socio cultural mix is reflected in the islands architecture, way of life, language and the

racial mix of its people. Kiswahili is a lingua franca for the country, however other languages

like English, Arabic, Italian and French are also in use.

Table 1: Population of Zanzibar

Population Intercensal Population Average Sex

Region
Ratio
Both sexes Male Female Average Annual Density Household

Growth Rate Size

Tanzania 1,303,569 630,677 672,892 2.8 530 5.1 94

Zanzibar

North 187,455 92,114 95,341 3.2 399 4.8 97

Unguja

South 115,588 57,880 57,708 2.0 135 4.4 100

Unguja

West 593,678 283,590 310,088 4.2 2,581 5.2 91

Urban

South 211,732 103,222 108,510 1.3 369 5.3 95

Pemba

North 195,116 93,871 101,245 1.1 588 5.4 93

Pemba

Source: Zanzibar Population Census 2012

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Nowadays, the hospitality industry is a powerful system of the regional economy and tourist
center and an important component of the tourism economy. The hospitality industry is different
means of collective and individual accommodation: the hotels, motels, youth hostels and
dormitories, apartments, tourist shelters, as well as the private sector involved in the tourist
accommodation.
To start with, hospitality is a domestic concept, which means a special kind of hospitality:
hospitality of the hosts at the reception of the guests. Telfer (1996) characterized the nature of
hospitality as the sharing of drink, food and shelter to people who actually are not permanent
members of a household. In turn, Lockwood and Jones emphasized that there was no
responsibility for guests to return hospitality to hosts (2000).
The hospitality industry as an economic activity includes the provision of services and the
organization of short-term accommodations in the hotels, motels, campsites and other
accommodation facilities for a fee. According to Lashley and Morrison, “to better understand
hospitality activities we need to understand the provision of food, drink and accommodation in
the nuclear family” (2000, p. 10). In addition to above listed, Lashley and Morrison (2000) state
that, “hospitality is essentially a relationship based on hosts and guests” (p. 15).

The hospitality industry includes various spheres of human activity – tourism, recreation,
entertainment, hotel and restaurant business, catering, sightseeing activities, exhibitions and
various scientific conferences.
This study adopts the definition that hospitality industry is a business aimed at providing the
visitors with accommodation, food, and organizing their leisure time. The travel services,
including in the framework of hotel services, referred to the social and cultural services. They are
built on the principles of the modern hospitality, which increases their role in the development of
domestic tourism, but also poses the certain problems in the system of training for tourism and
hotel service.
Thus, the hospitality industry is a comprehensive scope of employees that meet any demands and
desires of tourists. The commercial orientation of tourism enterprises leads to tourism and
service businesses as well as the creation of specialized industry for the production of souvenirs
and tourist destination.

Unemployment is among the biggest challenges in most of the nations around the world. It

is an ongoing problem that affects both developing and developed nations. Unemployment is

well defined as the situation of which an individual is staying without having an official job

of or existing without a job or percentage of individuals which are capable to work and

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keenly looking for jobs but they are unable to get a job. Unemployment reveals the inability

of a national economy to make full utilizations of labor available (World Bank, 2019).

Absence of labor force renovation increases the number of jobless individuals leading to high

rate of unemployment. A high amount of jobless indicates an insufficiency in the labour

market, expanding poverty and low living standard.

According to ILO (2018) unemployment is well-defined as the share of the labor force that is

without work but available for and seeking employment.

According to Chinedu (2017), concluded that more than 90 colleges and universities in every

year produce thousands of graduates still companies mark them as unqualified for the

vacancies available. This results in a frustration that brings social crimes like robbery, drug

trafficking, illegal migrations to developed nations, prostitutions just to ensure better

standard of living. Kemi and Dayo (2018) stated that the problem of unemployment is in

various dimensions. There is a situation of unemployment in which people tend to gain little

income that will meet their basic needs, a situation where people work on the jobs that do not

match with their level of education and experience and a worst scenario whereby people tend

to look for jobs but it difficult to get, others are ready to start up their own small enterprises

but hindered by the existing poor macro-economic situations.

According to Swai (2014) the problem of unemployment in Tanzania and other African

nations have been growing disregarding determinations to train mutually children and adults.

In the current periods there has been raised anxiety above the catastrophic excess of social

prospective, specifically for the young generations, as greatest number of the youth are

jobless or underemployed. It is understood that employment is a significant factor for any

persons, specifically for the young as they are moving in the direction of old age. Relatives

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and universities tragedy a vibrant part in assisting adolescences exploration professions that

equal their powers and welfares and in assisting them comprehend the prominence of

constructing elementary labor abilities so they are ready for employment (NCWD, 2012).

1.2 Statement of the Problem

The key problem to be addressed by this dissertation is the un employment effect from

business competition in the hospitality sector of the tourism industry in Paje village.

Knowledge about this is important because, business competition in an industry affects the

labour market. As companies compete, they strive to gain a larger market share than their

opponent(s) and hence lager profits. In doing so, companies tend to produce more and better

products/services to attract customers. Because labour is an input in the production process,

the firms therefore have to employ more workers so as to increase production.

Given the increasing trends in business competition among tourism institutions in Paje

village, it is expected that these firms should be employing more as competition stiffens in

the market. The main question is therefore, does business competition in the hospitality

sector of the tourism industry really affect employment status at Paje village in south district

of Zanzibar? And if so, to what extent and what is the net effect?

Zanzibar recorded Arrivals of 42,443 Tourist visitors in January 2022 compared with 49,868

visitors in January 2021 and 48,167 visitors in December 2021.

Currently The hospitality sector specifically Hotel entity show that the market is highly

competitive as there is increase number of new hotels of different classes (stars) every year,

there is free entry and exit which show that the market is open to business. Trends of

employment in the industry show that there are no significant increases or decreases in

employment, the levels remain more or less the same. However, statistics show that

competition is increasing as the number of firms increase in the industry, the question
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remains, is this competition good or bad for employment? Is it significant? To examine this,

the researcher will uses panel data on the hospitality sector in the tourism industry to check

for the overall firm specific effects on competition.

The data has rich information on the level of competitions of those sectors considering their

market shares and the level of employment of those sectors have generated. The data is

obtained from Commission for tourism in Zanzibar and other respective institutions.

1.3 Objectives of the Study

The objective of the study was identified in two categories namely general and specific

objective of study. This was explained as follow.

1.3.1. General objectives of the Study

The main objective of this study is to analyze the extent to which the business competition in

the hospitality sector of tourism industry affects the reduction of un employment in Paje

village of Zanzibar.

1.3.2. Specific objectives of the study

The study specifically intended to achieve the following objectives.

i. To identify the types of competition in the hospitality sector of the tourism industry in

Paje village;

ii. To analyze how the competition conducted in the hospitality sector of the tourism

industry in Paje village;

iii. To analyze how those competition affect the creation of jobs in the hospitality sector

of the tourism industry in Paje village.

1.4 Research questions

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 i. What are the types of competition in the hospitality sector of tourism industry?

ii. To analyze how the competition conducted in the hospitality sector of the tourism

industry?

iii. To analyze how those competition affect the creation of jobs in the hospitality sector

of the tourism industry?

1.5 Significance of the Study

i. The study may assist the academics to fill the literature gap in relating to business

competition in the tourism industry and the labor market.

ii. The study may act as a source of literature for the scholars who intend to do research

on how business competition affects the job creation in the hospitality sector of the

tourism industry in Zanzibar.

iii. It is also significant for policy recommendations so that policies made should take

into account business competition in the tourism industry in Zanzibar in employment

policies and Tourism policies.

iv. The study will aid the government in making decision relating to improvement of

business competition in the growth of hospitality sector in the tourism industry so as

to guarantee the growth and profitability as well as donating the sustainable economic

expansion at the level required hence create as many employment opportunities as

estimated.

1.6 Scope of The Study

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This study will be carried out in Paje village which is located at South East Cost in the South

District of Unguja Island in Zanzibar. This is the subject matter of the study which will look

at the business competition in the hospitality sector of the tourism industry. The study will

concentrate at Paje village since it is easy to avail the data and access to the data collection

areas due to the availability of data and the amount of fund that was available.

The study will covers the hospitality sector of the Tourism industry and those are

accommodation, restaurants, travel and tourism(tour operator) and entertainment & recreation

(tourist music night club). The study will establish the effect of business competition on job

creation with reference to various types of competition techniques used by players in the

hospitality sector of the tourism industry and the relationship between business competition

and un employment reduction. Business competition is the independent variable whereas un

employment is the dependent variable.

This study will cover the analyzation of business competition and job creation on that village

at the year of 2022.

1.7 Organization of the Report

The next chapter presents literature reviewed on areas related to this study including theories

on the matter as well as the empirical studies done on this subject. It also brings out the gap

that needs to be filled. Chapter three shows the methodology of the study; data used in this

study and the method of model estimation employed. Chapter four present the results and

findings of this study and their interpretation. Finally, Chapter five sums up by suggesting

policy recommendations and areas for future studies on the subject.

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CHAPTER TWO

LITERATURE REVIEW
2.0 Introduction
This chapter presents what other scholars have written about competition and employment; it

consists of three sub-sections. Namely conceptual framework of this study the theoretical

literature review and empirical literature review.

LITERATURE REVIEW

2.0 Introduction

This chapter deals with the assessment of literatures which relate to the topic the business

competition in the hospitality sector of the tourism industry and unemployment concept.

Several literatures would be selected and relevant areas would be reviewed and evaluated.

This chapter provides information about aspect of previous works which relate to this study.

In view of this, a number of presentations culled from various sources are under review here.

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2.1 Definition of key terms and concepts

2.1.1 Un employment
According to the (ILO)2020, un employment or un employed person refers to the share of

the labor force that is without work but available for and seeking employment. Employed

person according to ILO 2020 is a person aged 15 years or older who have worked (for pay

or profit for at least one hour during a given week or having a job from which being absent

under conditions on the reason of absence (holidays, sick leave and maternity leave.) or

duration. An employment must comprise an agreement between an employer and an

employee that the employee will provide certain services. In return, the employee is paid a

salary or hourly wage. Although employees can negotiate certain items in an employment

agreement, the terms and conditions are primarily determined by the employer. Both parties

may also terminate the agreement.

2.1.2 Competition
In its simple plain meaning, competition indicates a process by which two or more parties

engage in a contest/rivalry. (John. M. Clark,1925) explains competition as “rivalry in selling

goods, in which each selling unit normally seeks maximum net revenue, under conditions

such that the price or prices each seller can charge are effectively limited by the free option

of the buyer to buy from a rival seller or sellers of what we think of as “the same” product.

As for (George J. Stigler,1957) one of the leading authors of the Chicago School of

10
Economics describe competition as the absence of monopoly powers. (Joana and

Albertina,2008) define competition as the relationship between several undertakings offering

the same goods or services to identifiable customers. Competition can also be termed as a

process of rivalry between suppliers which eliminates excessive profits, removes excessive

supplies and satisfies existing demand and that it is the same as the process of responding to

new situations and a means of achieving new equilibriums in the market (Stigler, 1957).

Competition can be measured through indices such as the Herfindahl-Hirschman index, the

concentration ratio, and the four-firm concentration ratio. Competitiveness means the ability

and performance of a firm to achieve a certain level of productivity in the market relative to

others. It is the ability to provide goods or services effectively and efficiently than the

relevant competitors (Blunk, 2006). This can be measured by the company’s ability to make

profits and market shares. Schmuck (2007) researched on competitiveness index in which he

found that the index is determined by changing target markets, adaptation to changes, the

rate of marketing budget, the participation in strategic alliances and the workforce

fluctuations

From these definitions, competition implies some rivalry in the market place under the

following conditions:

i. Firstly, at least two or more providers or suppliers of goods or services must exist in

the market, i.e., the absence of monopolistic or heavily concentrated markets.

ii. Secondly, there must be some rivalry visa -vis cooperation or coordination between

providers or suppliers. Price setting, for example, should purely result from market

operations instead of suppliers’ agreements.

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iii. Thirdly, the suppliers or providers must be operating within the same market

limitations.

iv. Fourthly, there must be sufficient competitive restraints such that consumers may

easily and swiftly change to another supplier if there is a change in behavior of one

firm, in cases of excessive increase in price.

2.2 Theories and Conceptual Framework

Theory for competition in an industry suggests that firms compete in order to

maximize their profits and to outdo their rivals in the market. Models are available

which analyses the different strategies that competitors may use in the market to

achieve their ultimate goals, some of the strategies include increasing output, price

reviews and cutting costs. In doing so, there are some effects on the labour market

that the firms might otherwise overlook be it positive or negative effects. There is no

concrete evidence however that implies competition is only good or only bad for

employment in an industry. Some empirical studies have been conducted to analyze

the effects of competition on the product or labour market. Competition has been

captured by different variables including concentration ratios and market share.

It is expected that a higher competition (more firms in the market) would lead to more

employment by the firms and overall, as compared to when there is higher market

concentration. A firm will hire workers as long as it thinks that the workers will bring

more profit to the firm and the skills, they have do match their recruitment needs.

Some empirical studies have shown that there is a positive and significant relationship

between competition and employment in an industry. Moreover, theory also suggests

that there are some aspects of competition that will make a firm cut down on workers

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instead of employing more. the increase in employment will also depend on the

marginal productivity of an extra worker.

2.2.1 General theory of employment John Maynard Keynes (1935–36), propose the

level of output and employment as a whole depends on the number of investments.

labour is used as an input in the production process and therefore as more units of

labour are employed in production the output is expected to increase. But there is a

tendency for the marginal output per unit of input to decline after reaching a certain

level, therefore, more units of labour would not necessarily increase output.

Moreover, in relation to competition, it is expected that as competition increases

employers will employ more so that they would increase their output, but on the other

hand they might decide to reduce employment so as to decrease costs of operation to

maximize profits. The expected effect is therefore ambiguous until the net effect is

known.

2.2.3 Categories of Competition

Competition are categorized into two:

i. Direct competition.

ii. Indirect competition.

For a direct competition, the firms offer essentially the same product in the market

they compete by introducing new products or services to the existing ones;

Indirect competition, on the other hand, also means substitute competition where by

the products or services offered are close substitutes. Here the rivals strive for their

products to be preferred by majority compared to the other products.

2.2.4 Industry Concept of Competition

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In game theory competition is referred to as an attempt to gain monopoly power and

profits in the market. In industrial economics, competition refers to the use of

strategies by a company to gain a market share through price and non-price strategies.

Competition usually results in reduction of prices and for identical products price is

reduces until it is close to the marginal cost of production. Price competition involves

reducing prices to attract customers while non-price competition includes such things

as advertising, research and development, product differentiation (Church and Ware

1999).

2.2.5 Classes of Competition

Classes of competition determine the market structure of the industry in question.

There is perfect competition, monopolistic competition, oligopoly, and monopoly.

Other classes include; duopoly (two firms only), monopsony (one buyer), oligopsony

(a few buyers). Here we will discuss some of these classes relevant to the hospitality

sector of tourism industry in Paje village in Unguja Zanzibar.

2.2.5.1 Perfect Competition

This kind of competition is also known as pure competition and it exists when a large

number of firms produce identical goods or services. Most of these businesses are

small scale and actors have no control over the market price. Entry and exit from the

market is fairly easy and equilibrium is reached when demand and supply are the

same. This kind of competition does not easily exist in a market because it requires

perfect information which is hard to achieve.

2.2.5.2 Monopolistic Competition

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This exists when there are a large number of sellers producing differentiated products

in the market. Products are differentiated based on price, quality, branding or

packaging. This usually occurs in retail businesses.

2.2.5.3 Oligopoly
An oligopoly is when there are a few firms in the market and large investments are

required to enter the market. Products sold in this market can be similar or

differentiated and sellers have some control over prices.

2.2.5.4 Duopoly
This is when there are only two firms providing the market with a product or service.

Between the two firms, one can be a dominant firm (an incumbent) while the rival can

be a smaller firm with a smaller share in the market. An incumbent firm might decide

to restrict entry of the rival or to sustain it.

2.2.5.5 Monopoly
A monopoly is a market situation where there is only one producer in the market. This

producer determines the market price and the amount of the product to supply to the

market. The producer can limit output so as to sell at a higher price to maximize

profits.

3 Empirical Literature Review

Business Competition in hospitality sector of the tourism industry toward

Unemployment Reduction

Alegre et al. (2019) investigated the effects of not going on holidays correlated with
unemployment during the economic crisis in a set of European Union (EU) countries.
They found that this effect emerges when there is an unemployment rate of over 10%.

15
Alternatively, Dogru and Bulut (2018) recognised that the tourism industry helps EU
countries to recover from economic crises.

An increase in tourism and consequently in the demand for goods and services
designed for tourists lead to a reduction in unemployment. Based on the previous
research conducted by López (2019), the tourism sector has influenced the growth
rate of the unemployment, which means when the tourism sector decreases, the
unemployment rate will increase in Mexico. Moreover, the results also show that the
relationship between the tourism sector and the unemployment rate becomes stronger
during an economic crisis yet weaker during the expansion period.

Brandt (2018) investigated wage determinants of individuals employed full time in

the Swedish tourism sector based on different panel data models. He confirms the
positive effects of tourism on employment. On the other hand, he shows evidence of
lower incomes of individuals employed in tourism industries than in the rest of the
economy. Similar conclusions concerning the perception of jobs can be found in Che
Ahmat et al. (2019).

According to Dogru and Bulut (2018), the tourism industries, such as

accommodation, were amongst those service sectors that have recorded a positive
average annual growth rate of employment since the severe economic crisis in 2008.
There is potential for hospitality to contribute to local employment development and
growth of less developed and remote areas. Based on the generalised method of
moments and Granger causality tests in panel data models Šergo (2019) concludes
that the tourism industry across the EU positively impacts employment.

Using spatial econometric techniques to model tourism and hospitality employment

clusters, Chhetri et al. (2017) concluded that employment in rural tourism regions in
Australia is more concentrated in operational tourism services. In contrast, city-based
regions have high levels of employment in hospitality services.

Alsarayreh (2017) proved that the impact of tourism reduces the number of
unemployment rate due to the financial incentive available in touristic that help
decreases the number of unemployment. The researcher claims that there is a
statistically significant impact of tourism in reducing the unemployment rate. Thus, it
is proved that there is a negative relationship between two variables, whereby the
higher the tourism arrival, the lower the unemployment rate.
Therefore, tourism-led employment is seen as a strategic alternative that involves
long-term considerations of the hospitality labour market and human resource
developments (Li et al., 2017: Radjenovic, 2019). Jobs created or maintained within
tourism industries can help counteract economic decline and contribute to

16
employment and economic growth (Badulescu et al., 2021; Brida et al., 2016; Cheng
et al., 2021; Ferrari et al., 2022; Haller et al., 2021; Witt et al., 2004).

Castillo et al. (2015) analysed the relationship between tourism policies and
employment using a synthetic control method and combined it with econometric
approaches of programmed treatment evaluation, allowing flexibility to control for
different cofounders and checking the robustness of results. Findings from Castillo et
al. (2015) study support public intervention in tourism as tourism employment
substantially increased with the implementation of tourism development policy. The
latter is particularly relevant for the debate on the effectiveness of tourism policies
using modern micro econometric approaches (Južnik Rotar, 2019).

According to UNWTO and ILO (2014), the economic impact of tourism industries on
employment can be summarised as direct employment in tourism industries, indirect
employment in the sectors supplying inputs to the tourism industries, induced effect
on employment as a result of spending, and total effect on employment via
employment multiplier in the tourism industries indicating an effective way of dealing
with unemployment. Despite foreseen tourism-led employment opportunities,
employment in tourism industries, according to UNWTO and ILO (2014), has been
one of the least explored strands of tourism (Baum, 2018; Robinson et al., 2014;
Shakeela et al., 2011; Solnet et al., 2014).

Moreover, Winters et al. (2013) justify public intervention in tourism to promote

tourism employment, which is seen as a rational policy choice that provides economic
benefits of tourism to local employment development to a socially optimal level. In
addition, investment in the tourism economy can reduce local poverty mainly through
job creation.

According to Brojeh (2012), Arabic countries have recognized the importance of the
tourism sector in the reduction of unemployment and thus, the country has placed
tourism competitiveness at the forefront. This is primarily because tourism activities
strongly contribute to job opportunities and eventually stimulate the growth of the
economy in the country.

Zayyan Brojeh, Ali, 2012, the reality and importance of touristic competitiveness
of Arab countries in the light of current challenges: a case study of Hasibah bin
BoAli Elshelf, Master Thesis, Arab countries have great tourism potential that
can qualify them to be one of the most attractive areas of the world, but their
share of world tourism does not exceed 7%, which is not commensurate with the
richness of the Arab countries of different natural, cultural and civilization
resources. Arab countries have recognized the importance of the tourism sector
in economic growth, poverty alleviation and the alleviation of unemployment
17
rates, and have placed the importance of tourism competitiveness at the top of
their priorities. Through this research, the researchers try to address the reality
and importance of tourism competitiveness of the Arab countries in light of the
new changes and contemporary challenges faced by the world and Arab
countries, which in turn led to change the map and trends of international
tourism. In this study, the researchers will also discuss the tourism and travel
indicators in Arab countries represented in the regulatory framework of tourism
and travel, the priorities of tourism and travel; the natural and cultural
resources of tourism.

2.3 Empirical Literature Review

A few studies exist on competition related aspects of tourism. Kahyarara (2011)

found a positive a significant correlation between competition and productivity. He

set out to analyse the impact of market competition on performance of firms in

developing countries. Competition was measured using the HH index and used

generalized method of moments (GMM) for his estimations as well as fixed effects

method for the panel data. He indicated that competition enhances market

productivity and hence profitability. However, he did not analyse the effect on

employment. The competitiveness of a country derives from the performance of its

enterprises which certainly include the hotel industry (Barros, 2005). While a

community's growth stimulates hotel performances, in turn hotels contribute to the

community's economic, social, and cultural development (Go, Pine, &Yu, 1994). The

hotel industry benefits from a destination's economic growth and stability and

community developments, such as office buildings, retail malls, and entertainment

facilities, which draw both business and leisure travelers and help create demand for

hotel rooms. There are many other factors (e.g., input, process, output, and outcome)

that determine the hotel industry's competitiveness. Indeed, hotels utilize input factors

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and produce a variety of products and services (outputs), and the nature of these

outputs depends very much on hotels' strategic and competitive positions in the

region.

Akbaba, A. (2006) did an empirical study in Turkey with the general objective of

finding the extent to which competition in the hotel industry has affected the service

provision. He used cross-sectional survey design to analyse marketing competition in

tourism industry in Turkey. He found that free and open competition benefits

individual consumers and the global community. His study did not analyse the effect

of competition on firm level employment and it used cross sectional survey data. This

study however differs by using panel data analysis and taking into account the effect

of competition in this industry on employment. Moreover, this study uses fixed

effects regressions on the data to see if there are any firm specific characteristics that

may affect the results of competition on employment.

Blanchflower and Machin (1995) analysed the effect of product market competition

on employment and wages using two cross-sectional surveys in Britain and Australia

in 1990 and found that competition has only a limited role on employment and wages

although some significant effects are found in some of the skill groups analyzed.

Basker (2002) in a study titled “Competition, Efficiency, and Employment: Labour

Market Effects of Wal-Mart Expansion” in the USA analysed the employment and

efficiency effects of competition. He used data from a census survey and conducted

an OLS regression while correcting for errors and found out that increase in

establishments (competition) resulted in the net creation of more jobs in the economy.

This study used cross-sectional survey data but did not account for individual specific

19
effects and that might affect competition and bias the OLS regression. Although the

results were a net positive increase in jobs, fixed effects might have generated

otherwise insignificant results. Moreover, Basker found that as competition increased

smaller retail firms closed down which affected wholesale firms and their employees

were forced to move to neighboring countries.

A study by Amable and Gatti (2001) found out that increased competition in the

product market increases the hiring and firing rates of competitors. They used panel

industry data for German and used a monopolistic competition model and assume

firms use efficiency wage mechanism. They concluded that the net effect of

competition on the labour market depends on the relative elasticities of the firing and

hiring rates to an increase in competition. Moreover, they found that competition

increased employment in the market and that the consequent rise in turnover rate calls

for a rise in efficiency wage in the product market.

Konings and Wash (2000) also did a study in the UK analyzing the effects of

competition on the labour market controlling for unionization. They used firm level

panel data for the period of 1985-1989 and found that in the short run competition

decreased employment growth but this effect was not present in unionized firms; that

is in unionized firms, competition seemed to increase employment. They also

suggested that the results may have been influenced by imperfections in the labour

and product markets.

A study by Davis-Blake and Uzzi (1993) was conducted to analyze what determined

the firm’s decision either to hire permanent workers or temporary workers. It used

data of the US department of Labor’s Employment Opportunity Pilot Project

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Employer surveys to test their hypotheses and found that firms employ external

temporary workers to allow for flexibility when they want to expand or decrease firm

level employment. It also found a positive relationship between the decision of a firm

to use permanent workers and factors such as firm specific employment, government

oversight, and bureaucratization of employment practices, firm size, and high level of

informational or technical skills requirement.

2.4 Gaps and Missing Links

Some of the studies used cross sectional data and employed some analytical study; a

few used panel data for analysis but did not account for firm specific characters that

might affect the models, some of the gaps that the researcher has seen from the

reviewed literature are: many of the past researchers used cross-sectional data and

analysed the data by using analytical study. Those who used panel data, the data was

for several countries but not for one country with several firms, they therefore

controlled for country specific characteristics.

In spite of the numerous empirical studies on the roles of business competition in

hospitality sector of the tourism industry in unemployment reduction in rural areas,

including the ones reviewed above, no empirical study has examined how business

competition in hospitality sector of tourism tend to reduce un employment especial in

rural area as well as which area in hospitality sector of tourism create large number of job

opportunity. This study is attempt to fill this gap in the literature and provide the

foundation for evidence-based on the contribution of business competition in hospitality

sector of tourism industry to unemployment reduction and provide the conclusion of

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which type of the business competition of hospitality sector of tourism industry operated

be highly solve economic challenges of unemployment in the rural areas.

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CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction
This chapter present the methodology that will be employed in this the study. The chapter

has seven sub-sections namely; research design, study area, study population, sample size

and sampling techniques, data collection methods, data collection instruments data

analysis methods,

3.1 Research design

According to Kothari (1993), research design is defined as the conceptual structure within

which the research is conducted. Therefore, a case study research design was employed in

this study. A design technique used in this study is “Random sampling technique” The

reason for using this research design is that it allows all members of the group or population

to have an equal and independent chance of being selected for the sample. Random sampling

technique will be employed when selecting the employees at operational level. This will be

done to avoid bias.

This study will be based on the Qualitative and Quantitative approach as include both

primary and secondary data.

Qualitative data will be used for those questions that will need the descriptive information,

while Quantitative for those questions that will need the numerical data.

Secondary data based on collecting overall data about businesses competition and

employment creation in the tourism industry in Zanzibar at the various hospitality sectors

which are already documented. The source of these data will be from Zanzibar Fair

Competition Commission, Office of the President, Economy and Investment, Commission

for Tourism, Zanzibar Office Statistic and other reliable sources such as internet.

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Primary data will be used the most in analyzation of this research; it collected from different

competitors of hospitality businesses in the tourism industry and people who are employed in

those sectors at the rural area (Paje’s village).

3.2 Description of Study Area

The study was conducted in Paje village. Paje is a village in Zanzibar. It is on the East Coast

of Zanzibar Island (Unguja) between the villages of Bwejuu and Jambiani. The village is

widespread from about 1km South (Bwejuu) on 5km strip to the South (Jambiani). You can

drive here from Stone Town in 34-40 minutes by car or motorbike. The whole village can be

reached by foot, or you can make a visit around by bicycle or by taxi. According to the

National Bureau of Statistics Tanzania in the census of 26/8/2012 the total area of Paje is

about 34.89 km2 with density of 93.1 in h/km2. Paje had a population of about 3,245 (2012

population census). Paje village is an amazing coral beach of white sand that slopes gently

down on a turquoise background. The simplicity of the inhabitants and their receptions are

touching. The larger population of Paje derives their livelihood from farming, fishing and

engaging in hospitality business of tourism. In recent years, the dominant activity in all the

villages in the east coast is the collection of algae.

Due to the higher interaction of the people at Paje from different areas of Zanzibar and the

mainland of Tanzania as well as the better businesses environment, the hospitality business

take a greater position of economic activities among the citizens. Hence the understanding of

the contribution of these Hospitality business to employment creation in Paje is very crucial

aspect.

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The researcher will use Paje village as the area of study since he is a resident of Zanzibar and

this will help the researcher to simplify the data collection process of the study due to the

familiarity of the studied area as well as the respondents.

3.3 Statement of the Hypothesis

This study used linear regression economic model to test the hypothesis of zero impact on

independent variable to dependent variable. It examine whether the independent variables

has the significance impact to dependent variable or not. In this study number of employees

person is used as an indicator of un employment rate reduction and so is a Dependent

variable while Businesses Competition in hospitality sector of tourism in term of tourism

arrival per month and Net Profit per month are independent variables.

The model of this study:

EMPt= ß0 + ß1TOURt + ß2NPt + €t

Whereas:

EMP = Dependent variable (Number of employees in hospitality sector of tourism)

ß0 = Constant term that indicates the number of employees person in hospitality sector of

tourism when there is no any impact of Independent Variables.

ß1 = Slope coefficient that show the % increase in dependent variable when Tourist arrival

per month increase by 1 unit.

ß2 = Slope coefficient that show the % increase in dependent variable when Net profit per
month increase by 1 unit.

TOUR = Tourist arrival per month in the business

NP = Net Profit per month in the business.

€t = Stochastic error term.

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Table 2: Explanatory Variables used in the Empirical Analyses

Name of Description of Variable Expected Sign

Variable

TOUR Tourist arrival per month in the +

business

NP Net Profit per month in the business. +

The tests of this model are:

HO: ß1 = 0 and ß2 = 0

HA: ß1 ≠ 0 and ß2 ≠ 0

Whereas:

HO: ß1 = 0 and ß2 = 0 are our null hypothesis that the coefficient of independent variable

has no significance impact to dependent variable.

HA: ß1 ≠ 0 and ß2 ≠ 0 are our alternative hypothesis that the coefficient of independent

variable has an impact to dependent variable. The impact may be Positive or Negative.

The hypotheses which were tested are as follow:

 HO: Business competition in hospitality sector of tourism do not reduce un

employment rate in Paje Village.

 HA: Business competition in hospitality sector of tourism reduce un employment

rate in Paje Village.

3.4 Study Population

The population is defined as the entire group of individuals, events or objects having

common observable characteristics from which the researcher draw respondents. the study
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population will include the managers, owners as well as employees working from hospitality

sectors of tourism industry in Paje village.

3.5 Sample size and sampling technique

3.5.1 Sample size

This study adopts the definition that Hospitality Sector in the tourism industry as the sector

which comprises food and beverage ( restaurant), accommodation( hotel and bungalows),

travel and tourism ( tour operator), and entertainment recreation (tourist music night club)

The subjects will be randomly drawn from Paje village to the population who are engaged

in business competition in hospitality sector of tourism at most of 30 businesses owners,

managers or employees instead of them were selected from that village.

The table below shows the total Samples which will be randomly selected from sampling

by figures in different hospitality businesses in the tourism sector which are operated at

Paje Village.

Table 8: Randomly Samples Selected

Sectors Population Sample size Percentage of Sample

size size

Hotel (3 & 4 star) 18 8 26.66%

Guest House 22 8 26.66%

Restaurants & bars 12 5 16.66%

Tours (Operator & guide) 15 6 20

Tourist Night Club Music 3 3 6.66%

TOTAL 89 30 100.0

Source: Field data (2022)

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3.5.2 Sampling Technique
The types of sampling technique that will be employed in this research is called "Random

sampling", interviewees. Random sampling is a process of selecting a sample that allows all

members of the group or population to have an equal and independent chance of being selected

for the sample. The researcher will use Random sampling to select 30 respondents among

stake holders of hospitality business of tourism in the Paje village. Random sampling

technique will be employed when selecting the employees at operational level. This was done to

avoid bias. Adam and Kamuzora (2008) described the advantage of this technique and said

that; it is less expensive and quick for selecting a sample. Therefore, in this type of sampling

items was selected depending on the suitability in relation to the study.

3.6 Data Collection Methods.

Both primary and secondary methods of data collection will be utilized. Primary method

consists of structured questionnaires and interviews which shall be employed to those who

are seen difficult to use questionnaires.

The secondary method consists of references into previous scholar work on business

competition in hospitality sector of tourism, textbooks and journals.

3.7 Data Collection Instruments

The following instruments were used for data collection:

i Documentation: this involved collecting information and data from existing reports

and documents on hospitality sector of tourism industry.

ii Structured questionnaires: this Instruments will be used so as to generate

information and data, which subsequently was used for both qualitative and

quantitative analysis. Specific questionnaires for each group were designed.

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iii Checklist of leading questions: these questions will be designed to guide researchers

in conducting dialogue with a range of stakeholders in the tourism sector. The aim

was to enable collection of the views of officials in the hospitality sector of tourism,

for instance, on local costs, benefits and tourism policies and plans.

iv Observations: observations during the fieldwork will be used mainly to assist to

probe on issues beyond those which are covered in the structured questionnaire and

interview checklist.

3.8 Estimation Technique

Using Ordinary Least Squares regression (OLS) techniques, the coefficient of the

variables in regression model will be estimated. For the study estimates with OLS the

function of Profit Margin with respect to percentage growth of business competition has

to be transformed in to the model to satisfy the Classical Linear Regression Model

(CLRM). So that comes up with the usual assumption of Best Linear Unbiased Estimate

(BLUE). The OLS technique will be employed in order to minimize the differences

between the collected observations in some arbitrary dataset and the responses predicted

by the linear approximation of the data.

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