Discuss about the Empirical Analysis Of Airline Business Model.
International marketing is one of the most important strategies of an organization that refers as the marketing carried out across the international borders. International marketing strategy is the strategy that is used for expanding the operations from local market to other emerging markets. When a company plans to expand its business operations in any new geographical market, it conducts an extensive marketing research so that it can understand the market trends and needs of customers in that particular country. This report is focused on international marketing operations of Inter-Realm Airlines that is planning to expand its operations in a new market i.e. Canada.
Inter-Realm (IR) is an international airline which was established in the year 1972 from a merger of London based Realm Airways and Dublin based International Airways. This merger between both the airlines tool place to capitalize on the developing package holiday market in the period of 1970s. It is mid-priced airline and not a low cost or budget carrier. Additionally, it is not a business or first class airline. This organization has the specialization in offering package holidays to Europe with the major destinations like Spain, France, Greece and Portugal. This report includes the discussion about the reasons why the company is adding new products in its service range. There are some factors which can contribute to the success or failure of airlines in new geographical market segment. It consists of the reasons behind the partnerships with intermediaries like DHL to assist distributing freight throughout Europe. A PESTLE analysis is conducted to make marketing research in Canada. Moreover, Hofstede framework is used to identify the cultural differences and factors which would need to be considered before IR made the decision to enter the Canadian market for transporting zoo animals globally.
As mentioned in the given case study, during the 1970s and 1980s, the business of Inter-Realm Airlines boomed and market share of the company has risen until it had captured around 12% of the United Kingdom market in terms of travellers transported. During 1990s and 2000s, the market share of airline remained steady but it has been gradually declining to 5% in the year 2016 when the airline transported approximately 6 million passengers. At that time, the company has understood that it can grow its business and operations by expanding its operations in other developing nations. In 1990s, it has expanded to different destinations like Thailand, North Africa and Florida. The major reason why IR is focusing on introducing new products and services in new geographic market is that company wants to improve its business and market share in all over the world (Boyd, 2018). Considering the needs of new products, IR is planning to include new services in its current product range i.e. business class services or bespoke flying experiences. There are some specific needs which force the organization to introduce new products and services in new market. These needs and reasons are stated below:
Looking at the customer needs and competition in the airline industry, the new chairman of Inter-Realm, Archie MacDonald has established a vision to become a “worldwide airline carrier”. This is the major reason that company is bringing new products and services in the marketplace (Hazledine, 2011).
This is one of the major reasons that forces Inter-Realm Airlines to introduce new products and services in new market. In 2016, the company has lost its market share and number of passengers travelled to different destinations. Considering this decline, the organization in planning to introduce new products likes business class flights, goods carrier and carrying the zoom animals internationally.
Inter-Realm Airlines is a mid-ranged airline that provides airline services that is more expensive than other low cost carrier in United Kingdom like Easy Jet, Ryanair and Southwest Airlines etc. These airlines are putting competitive pressure on IR airlines. So, company has planned to introduce new products to increase its customer base (Akamavi, et al, 2015).
Currently, Inter-Realm airline has very limited destinations and routes such as Greece, Portugal, Spain, France, Thailand, North Africa and Florida. The company is going through this new product development and business expansion so that it can increase the number of destinations all over the world. It will result in increasing the number of passengers to IR airlines (Cavusgil, et al, 2014).
There are some factors which contribute to the success and failure of new products and services of Inter-Realm Airlines. These factors are given below:
Aggressive competition from low-cost competitors
This is one of the most important factors which may have adverse impact on the growth of new product development of IR. There are various low cost airlines which flew to Canada such as West Jet Airlines, Flair Airlines and Wow Air etc. If the company introduces low cost flights in new market, it will lead the organization to failure in the future.
Effective Advertising and Promotion
While the company will introduce new products and services in the market, effective promotion and advertising can support it to enhance its market presence. This is the most important factor that can contribute to the success of new services of Inter-Realm Airlines. Under this factor, the company needs to adopt effective advertising and promotional strategies so that it can approach a larger population. Additionally, this airline can connect with the business professionals as it is planning to offer business class airline services (Button, 2017).
Globalization
Product innovation and trend towards globalization are two most significant dimensions of an organization’s business operations. Globalization is the process through which a business develops global impact and starts running on an international level. Globalization will have positive impact on new product development of IR airlines. The effect of globalization increases the cost cutting, competition and time reduction so IR needs to practice a systematic manner to enhance its product development process effectively. However, this factor can contribute to the success of IR airlines if company deals with all the factors efficiently (Wensveen, 2018).
Thus, the above-mentioned are the factors which can contribute to the success or failure of new product development of Airline in new geographic market (Solberg, 2017).
When a company plans to introduce its new products in new geographic area, it needs to make decision on market entry mode for that particular market. Market entry mode is a planned method that is used by an organization to deliver the products and services to a new geographical market and distribute them in new international market. It is the way through which an organization enters into a new marketplace. When exporting or importing the services, it refers to developing and managing contracts in other country. While expanding business, a company may have various market entry options like strategic partnership, joint venture, licensing, collaboration, franchising etc. Under the given situation, Inter-Realm Airlines needs to make decision on market entry option in the new geographical market segment i.e. Canada (Forsgren and Johanson, 2014). For this airline, it will be good to use strategic partnership while entering in new international market. As the company is planning to include new products in its product range so it can expand products by developing partnership with an intermediary such as DHL. It will contribute to the freight distribution throughout the Europe.
DHL is an international market leader in the shipping and logistics industry. This is one of the leading organizations that commit its expertise in international express, parcel, ocean and air freight, rail and road fright. This is a logistics company that connects people in more than 220 nations and territories all over the world (DHL Express, 2018). According to the given case, if Inter-Realm Airlines develops partnerships with DHL it will be able to expand its business by international expansion and new product development. There are various reasons that IR could form strategic partnership with DHL express. One of the foremost reasons is that DHL serves more than 500 airports in Europe, Latin America, Asia Pacific, Africa, Middle East etc. With this extensive air network, IR will be able to deliver the air-freight to different destinations of Europe. By entering into partnership with DHL, Inter-Realm Airlines will be able to scarp the higher baggage charges for passengers. This partnership will enable the guests flying IR to use DHL to deliver their baggage to their address or final destination at very affordable rates. It will allow the travellers with assured IR tickets to send the baggage to any address within the network of IR via drop off at any DHL service point in new geographic market. The passengers will be able to track their freight or packages through email, SMS, phone and online. In addition to this, this market entry mode will provide the benefits for anyone who is flying with IR. Apart from this, the airline will be able to distribute the freight all over the Europe (Iatrou and Oretti, 2016). By deploying its airplanes, it will distribute different products like garments, pharmaceutical products and perishable goods to European destinations. Moreover, the airline industry is exclusive in that it needs the efficient and safe transportation of valuable and oversized goods. DHL has a broad experience in aviation transportation and safely delivering goods. Thus, this strategic partnership with DHL will allow IR to increase its market presence in different markets. It will be a new business for this airline so company will be able to add freighters in its customer base (Pierce, 2011).
There will be various influences due to this new product development. As mentioned above, Inter-Realm Airlines is planning to enter into freight carriage business by developing partnership with DHL Express logistic company. Due to this, the airline will be able to establish an extensive and global network. DHL will provide IR passengers with exclusive and value for money service of safely shipping their baggage to any destination they are travelling to and distributing it to the final destination in timely manner. Additionally, it will enable the organization to distribute the goods in bulk to the final destination securely (Kleymann and Seristö, 2017). By developing this strategic partnership, both IR and DHL will be able to identify the strategic value of freight services and it will bring improved operational effectiveness and enhancement to the supply chain and logistics. From the above analysis, it can be stated that it would be a sound product development as it will assist the organization to increase its customer base and enhance its performance in international markets (Venkataraman and Pinto, 2017). It will increase the market share and offer a significant growth to Inter-Realm Airlines.
After making decision on market entry mode and new product development, International Marketing Manager of Inter-Realm Airlines will develop a report that will be presented to company’s Board of Directors. Under this process, the company will analyze the potential of new geographic market by conducting an extensive international market research. As suggested by International Marketing Manager, the company should expand its operations in Canadian market. This new geographic area can be analyzed by undertaking an international market research through the factors of PEST analysis (Daft and Albers, 2015). It will enable the organization to expand their international coverage towards their vision of becoming a ‘worldwide airline carrier.’ International market research of Canada is conducted below:
Under international marketing research, this is the most important factor which company’s international marketing manager will consider exploring the market potential for new products and exploring new markets internationally (The Conversation, 2014). Under political factors, IR will consider that there are various airline organizations which are operating their businesses in more than one country. In Canada, the airline industry is very mature with leading players like West Jet and Air Canada. The airline industry has a strong support from country’s government and parliament. In this market, most of the foreign invested firms use transfer pricing as a mode to make sure that most of the profits are realized favorably. However, the government in this country has the issue with the firms who transfer their profits to other nation if profits are earned in Canada (Homsombat, Lei and Fu, 2014). In addition to this, the airline industry in this geographical market is heavily taxed. If Inter-Realm Airlines expand its business in Canada by establishing strategic partnerships, it will not have to pay heavy taxes. It will have positive impact on its profits and revenues. It will increase the capacity of IR to expand the business beyond local market.
There are various economic factors which have large impact on the business of Inter-Realm Airlines. Canada is not only one of the richest nations worldwide; it is also among top ten trading countries. Moreover, it is the member of Organization of Economic Cooperation and Development (OECD) and economy of the country is dominated by its service industry including airlines as well. Under this, IR airlines can move from physical ticket bookings and check-in services to online booking services. It will assist the organization to save its operational costs. As mentioned above, the business of IR airlines got affected due to increase in the fuel prices. In Canada, there is economic upsurge during past few years so fluctuation in the fuel prices has tightened the airline sector leaving the leading airlines to fight for seat capacity. In addition to this, these airlines are using strategic partnerships and alliances to ensure the seat capacity (Homsombat, Lei and Fu, 2014). The decreased cost of fuel will assist Inter-Realm with lower costs of operations and more profits. Thus, it will be good for IR airlines to introduce its business class airline in this new geographic market.
In addition to above factors, Inter-Realm Airlines will consider the social factors as well. After making the international marketing research, it is found that safety is significantly regulated under the airlines regulations. In the country, Canadian Transport Agency is the authority that monitors the safety and security measures. It is a major factor in the airline industry. The country has strict regulations on the safety from the arrival to airport to final destination. Furthermore, the flights are checked routinely at airport after each flight. In addition to this, the demand of customer is shifted to premium services so Inter-Realm can introduce these new services in Canada (Papadopoulos and Heslop, 2014).
In this market, Inter-Realm Airlines can adopt aerodynamic technology so that it can differentiate itself from other existing players in the industry. The company needs to make investment in its internal operations. It can shift from physical bookings to online bookings. It can include first class airline services in its range. It will enable the organization to meet the customers’ demands (Pearson and Merkert, 2014).
Thus, this market research indicates that it will be good for IR airlines to expand and introduce new products in this geographical area. The market has a complete potential where this organization can survive and grow its market share.
In addition to above country and market factors, there are some cultural factors and influences which need to be considered before IR made a decision to enter into new market for transporting zoo animals globally. Under this business expansion, Inter-Realm airlines will consider different factors and influences which are given in the below given cultural framework (Deresky, 2017). This is the cultural framework that is given by Terpstra and Sarathy (2000) in their cultural theory.
For this airline, this is a unique service to transport the zoo animals by air. It is very important to consider the welfare and safety of animals. The transportation of zoo animals by air is considered the most expedient and humane way of transportation in international market. For the transportation of zoo animals in international markets, the airline needs to make contacts with the domestic and foreign Zoo Association as well (Basfirinci and Mitra, 2015). These cultural factors are stated below:
Language is one of the most significant factors that need to be considered by Inter-Realm airlines while transporting zoo animals in international markets. In this process, there may be possibility that there will be difference of language of both the countries. It will make the communication very difficult. Language can work as a major communication barrier among the people of different nations. It can affect the communication process in the flights of IR (Moran, Abramson, and Moran, 2014).
Environmental education is another factor that enables the airlines to identify the environmental issues and other processes while handling the zoo animals in flights. Under this cultural factor, the safety and security of the animals is considered primarily. The organization needs to train its staff so that they can handle the animals. It needs to use animal penning equipment and custom built stalls to safeguard the animals. Additionally, the airline needs to comply with worldwide standards for transporting zoo animals which are given by Live Animal Regulations (Linhart, Admas and Voracek, 2018).
Cultural and religious context of the nation may affect the animal treatment. The people from different country treat the animals in different way so it is very important to identify this factor. The staff in the airline needs to understand that different species and breeds of animals are treated in different manner. IR needs to consider that people view the animals as a source of labor, food and utility so they should treat with the animals with kindness.
Material culture includes the resources, spaces and physical resources which need to be considered by IR airlines. The airline needs to use crates to transport the zoo animals from one country to other country. Breeding animals need to be introduced to the shipping processes at earliest phase. It needs to give enough time to the animals that allow the animals to become adapted of crates (Malíková, Voslá?ová and Ve?erek, 2017).
In this way, IR airlines need to consider the above cultural factors and effects while transporting the zoo animals internationally.
Conclusion
From the above report, it can be concluded that Inter-Realm airlines can expand its business by introducing new products like business class airlines, freight carrier services and transportation of zoo animals from one country to another country. The above report finds out that company should focus on different factors which can have positive or negative impact on the growth of IR airlines. By introducing these new products, the company will be able to grow its market share in new geographical market. The market research conducted in new market shows that it has a potential and capacity where company can expand its operations effectively and successfully. Moreover, the IR should consider some cultural differences and factors which can affect the transportation of zoo animals.
References
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