International Business

Introduction1

Discussion1

Global strategy1

Factors Responsible for Globalization3

Analysis4

Pricing4

Distribution5

Organizational Structure5

Market liberalization7

Recommendations7

Conclusion8

References9

International Business

Introduction

The aim of this report is to assess the factors that are crucial in international business to operate in globalized competitive markets. For the purpose of study, low cost airlines business is chosen. There are many airlines that are operating only in home countries.

This report aims to assess the external and internal factors that influence the globalization low cost aviation industry. It also explores the strategy of marketing mix that is responsible for the international business expansion.

Discussion

Global strategy

By globalization and international business expansion, it is meant that companies of an industry compete in different parts of the world besides the home country. Such industry operates in international markets by making the standardized products for all markets. The location of the operations is the key value creator in international businesses. Thus taking advantage of customer needs across borders is a difficult task as it requires economies of scale, higher product development rate and lower costs (Stonehouse et.al 2004, pp. 135).The following figure shows the need of low cost airlines to expand globally considering the future air traffic.

Figure: World Traffic

Source: Airbus, Data Retrieved from https://www.google.com.pk/search?q=low%20cost%20airlines%20asia%20pacific%20market%20share&psj=1&bav=on.2,or.r_cp.r_qf.&bvm=bv.46751780,d.ZWU&biw=1280&bih=666&um=1&ie=UTF-8&hl=en&tbm=isch&source=og&sa=N&tab=wi&ei=Xx6dUbX-EcGSO-7TgPgJ#imgrc=ba4kaD87srXFSM%3A%3BuGjXId7XT63_MM%3Bhttp%253A%252F%252Fwww.airlinetrends.com%252Fwp-content%252Fuploads%252F2011%252F12%252FAsia-Pacific_growth_2030.jpg%3Bhttp%253A%252F%252Fwww.airlinetrends.com%252Fcategory%252Fformat-competition%252F%3B986%3B736

Factors Responsible for Globalization

The main drivers that determine the extent and nature of globalization in airline industry are:

Market drivers: for the airline industry, the major factor that affects the globalization of industry is the degree of homogeneity of customer needs. It also includes the global distribution networks that currently exist.

Cost drivers: the cost efficiency of the industry in terms of economies of scale is also responsible to formulate international business strategy. This includes other costs like transportation and product development costs (Hollensen 2003, pp. 11).

Regulatory drivers: These are the factors that affect the industry expansion globally due to government or law enforcing agencies. Trade policies are part of this driver. In case of low cost airlines, market liberalization is the strongest driver of international business. This segment also includes compatible technical and market regulations (Hollensen 2003, pp. 12). Privatization of the industry also comes under this segment.

Figure 1: International Planning Process

Source: http://globalmarketingtoday.wordpress.com/about/global-marketing-management/

Analysis

The low cost airlines can be defined as the services that allow minimum costs and prices. They offer maximum efficiency. These airlines use secondary and regional airports and have single types of airplanes to avoid training and maintenance costs. They offer point to point network only and have shorter flights. The costs are covered with eliminating in flight services facility (Quelch & Deshpande 2004).

Pricing

Low cost airline is known for its low cost fares. The company should discuss the alternative ways of transport that can hurt the business. If the airline enters the newer market with lower prices, then the traffic increases due to undercut prices (Gatignon & Kimberly 2004, pp. 104). When Southwest entered a new market in which 8000 people used to fly, on cutting off the prices it was able to increase the demand by 26000 passengers. This is an effective way that traditional airlines are also not capable to ...