Strategic alliance is a treaty between two companies working on the same industry to achieve a common goal, but two industries will remain individual (Ang, Benischke and Doh 2015). Such agreement mainly occurs for sharing resources to carry out a common project. In this era of globalization many leading organizations are appearing in such type of treaty. It is not an easy method to follow. It takes time as strategic alliance brings many changes in organizational strategies and positions. There are two forms of strategic alliance, such as- contractual forms and equity forms. Contractual forms are known as short- term contract between two organizations. Equity alliance mainly deals with the shares of the organizations. The term strategic alliance has become common in past few decades. The airline companies have participated in this alliance since 1990 (Borenstein and Rose 2014).
The following article has concentrated on strategic alliance in the airline industries. The report has articulated the factors that are responsible to bring globalization in the airline industry and discussed some strategies that can be used by the airline companies to enter into the foreign market.
Airline industry is rapidly growing high day by day. It plays key role in the globalization. There are various factors that are responsible for the globalization in the airline industry, such as customer requirement, behavior and so on (Brouthers, Nakos and Dimitratos 2015). To identify the key drivers of globalization in the airlines industry some important business tools can be used, such as- PESTLE analysis, Porter’s Five Force Model. This analysis will give a vivid idea about the key factors that are responsible for the globalization.
Political and legal issues are same. The intervention of government in the operations of the airlines industry may influence the change in the airline industry. Airline companies often face challenges due to government rules and regulations. This is one of the key issues that has brought revolution in the airline industry (Brueckner, Lee and Singer 2014).
Fluctuation in the price of oil and other raw materials may lead the airline industry to face various challenges. It may lead the industry to adopt new strategies to ensure the development.
The demand of airline industry has increased in last few decades. This influences the changes in the strategies of airline industry. Demographic factors also play a crucial role in the globalization in the airline industry.
The emergence of new technologies has influenced the changes in the airline industry. The demand of airline industry is increasing day by day (Chandra and Lederman 2015). In order to fulfill the requirement of the customers the airline companies needs to adopt new and innovative techniques. It has led the industry to bring revolution in the airline industry.
Climate change also plays crucial role in the globalization in airline industry.
On the other hand Porter’s Five Force Model also shows the key drivers of airline industry.
Fig: Porter’s Five Force Model
Created by: Author
The threat of new entrants always play crucial role in bringing revolution in an organization. It has played an important role in the globalization in the airline industry as well.
Changes in the raw material suppliers are also another key issue that bring revolution in the airline industry.
Customers are known as the key element of every organization. The change in customer behavior also leads the industry to adopt new techniques and strategies. The customer’s behavior and expectation level has changed in last few decades. Customers demand an attractive package in reasonable price. This has influenced globalization.
There are many other options for the customers. The business organization always faces the threat of substitute. It has influenced the globalization. Customers always look for attractive packages while they are paying price and they have many options that are providing same service within their budget. This has led the airline companies to bring changes in the organizational strategies and policies. This is considered as one of the key issues for globalization (Mellat-Parast et al. 2015).
There are various airline companies in the market that are giving tough competition to each other. The airline companies often faces various challenges due to the rival companies. This factor is also responsible for globalization (Descotes and Walliser 2013).
As per the previous discussion it can be stated that there are various external forces that has brought revolution in the airline industry. The change in the behavior of the customer is one of the key factors that have influenced the globalization (Descotes and Walliser 2013). The demand of airline industry is increasing day by day. It has led the industry to adopt new techniques to provide flawless and uninterrupted service to its customer. The number of business and leisure travel has increased in last few decades. The airline companies have adopted some new strategies to attract a large number of customers from the entire world to maintain their profit margin and achieve the desired position in the industry. The organizational management of airline industry has modified their prices as well. The customers of airline companies always look for an affordable and attractive air fare as they often travel for business or leisure purpose. It has brought revolution in the fare charts of the airline companies (Ciliberto and Williams 2014). The main objective of all the airline companies is to offer a lucrative package in an affordable price to draw the attention of a large number of consumers. Such changes in the customer behavior have influenced the globalization in the airline industry.In the last few decades the airline industry has undergone various changes. The price of raw material and oils is increasing day by day. It has influenced the organizations to adopt some new strategies to maintain the profit margin and avoid other future risks, such as- financial crisis, labor crisis. The innovation of new technologies is another major driver that is responsible for bringing changes in the airline industry. The advancement of online ticket booking service has raised the expectation level of the customers. The consumers prefer to book the tickets of their favorite airlines. It has become essential for the airline companies to provide online support to their customers to match the expectation level of their consumers (Rothaermel 2015). This is also responsible for globalization. The activities and policies of government is highly responsible for globalization. The airline industry is facing various obstacles due to the new policies and strategies of government. It has led the organizational management of airline companies to make changes in their strategies and policies. The In this era of globalization, airline industry deals with global customers. In order to provide them a flawless service the organization are required to embrace new techniques to improve the quality of their service. It has brought revolution in the industry.As per the given case study, legal and competitive nature of the industry is also responsible for the globalization in the airline industry. The airline industry has faced tough competition in the last few decades which led the organizational management to improve the quality of their service which has influenced the globalization. There are many legal barriers faced by the airline industry like market entry barrier. Government plays the key role to restrict the operations of the airline industry. This has led the airline to adopt strategic alliances. In 1990 the airline industry has appeared in the strategic alliance (Ozmel, Robinson and Stuart 2013).
There are various challenges that often faced by the airline companies. Although the scenario of airline industry has changed in last few decades and the organizational management of airline companies has adopted several new techniques to put a remarkable foot print in the industry, the organizational management faces difficulties in spreading their network in the foreign market (Jiang et al. 2013). The main objective of all the business organization is to expand their business in the foreign market. The business organization in recent time wants to set example in the global market. However, it is not easy and simple to expand business in the international market. Every organization experience various challenges to spread their network in the global industry.In order to achieve success in the global market the airline companies need to encompass some important strategies. It will be beneficial for the development of the organization. Some of the key strategies are as follows:
To establish a strong network in the foreign market the organizational management of any airline company must establish strong relationship with a foreign airline company. This is considered as one of the key tool to expand network (Grant 2016). Partnership will help the organization to achieve the desired position in the market. Many leading airline company has incorporate this strategy to build strong reputation in the foreign industry. An exemplary example of such airline company that has used partnership as tool to expand its business in the global market is International airline industry. The management of International Airline industry has used the tool partnership to put remarkable foot print in the Kenya. They have associated with many local airline companies and signed strategic alliance agreement to achieve desired target in the airline industry of Kenya. It helps them to observe the market condition of Kenya and requirement of the consumers. According to many reports, forming partnership with local airline companies has helped the organizational management of International airline to earn desired profit from Kenya. The airline companies must consider the fact while constructing their business strategy to expand business in the foreign market. This is considered as one of the most efficient tools to expand business in the foreign market. Local airlines will work as global intermediaries for the airline company that wants to expand its business in the global industry.Such alliance will be helpful for the airline companies to understand the requirement of the consumer and market condition. This partnership will be helpful for the airline company to carry out any international venture (Goetsch and Davis 2014).
It is one of the key tools that can be used by the organizational management of any airline organization. The organizational management must concentrate on designing their fare chart as per the economic infrastructure of the foreign country. This will be helpful for organization to draw the attention of maximum number of people (Gayle and Brown 2014). The demand of airline companies has increased in last few decades. People often look for some attractive package within their budget. This will lead them to choose an airline company that offers them a lucrative package in an affordable price. The airline companies that want to expand their network in the global market must incorporate this strategy into their rulebook. They can modify their price according the requirement of the consumers. This will be beneficial for the organization to attract a large number of consumers. Attractive package in an affordable price will help them to match the expectation level of the foreign consumers. The international airline industry has used this strategy to expand their business in the foreign airline industry. Although this strategy is not as effective as the partnership strategy, many organizations do not prefer to modify their price chart. According to many CEO of airline industry, the rates are fixed. They do not prefer to change their price chart. However, it is important for airline companies to consider the economic condition of the country while constructing business strategy to expand the business into that country. Consumers are the key element of airline industry. It is important consider the requirements of foreign consumers for spreading network in the foreign industry (EhsanUllah, Karlsson and Dada Olanrewaju 2016).
Conclusion
As per the previous discussion, it can be stated that the scenario of airline industry has changed in past few decades. There are various external factors has influenced the globalization in the airline industry. Finally in 1990 the airline industry has appeared in the strategic alliance agreement. The rise of various substitutes, rule produced by the government, emergence of new technologies and various other reason has led the airline industry to adopt new changes to maintain the reputation and achieve the desired position in the market. One of the biggest objectives of Airline Industry is to expand their business in the international market. It is not easy to expand business in the global market. There are two key strategy that can be helpful for the airline company to achieve desired position in the global market, such as- partnership and pricing. These strategies can be beneficial for the growth of the airline companies in the global market.
Reference
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Borenstein, S. and Rose, N.L., 2014. How airline markets work… or do they? Regulatory reform in the airline industry. In Economic Regulation and Its Reform: What Have We Learned? (pp. 63-135). University of Chicago Press.
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