The Dynamics of International Trade and Business - Research Paper Example

?International marketing plan strategy to penetrate new market Executive Summary The airline industry is one of the most important industry segments as it helps in the transport of individuals and goods over long distances. The aspect of globalization has accentuated the importance of the airline industry. In addition, increase in travel and tourism has also led to the growth of this industry segment. However, in the recent past airline industry market players have faced crisis situations due to the recent financial crisis which has robbed a major share of the profitability of the players of the airline industry. The present study would cover the aspect of international marketing strategies of Emirates airline in the Indian market. The choice of market assumes significance considering the fact that it is among the fastest growing economies of the globe. The analysis would be done in two parts. The first part would constitute an analysis of the external market environment along with the information about the product and the services being offered by the company. The second section would deal with the market audit and an analysis of the marketing strategies to be employed by the firm in the Indian market. Finally, a set of plausible conclusions and recommendations would be framed on the basis of the analysis conducted in the two sections which would help the firm to establish itself in the lucrative Indian market. Table of Contents Executive Summary 2 Table of Contents 3 Part A 5 Introduction 5 About the Company 6 Product or Service Analysis 8 Environmental Analysis 8 PESTEL Analysis 8 Summary of Part A 11 Market Audit 11 Analysis of Micro Environment 12 Market Analysis 12 External Analysis 15 Customer Analysis 15 Competitors 15 SWOT Analysis 15 Strengths 15 Weakness 16 Opportunities 16 Threats 16 Preliminary Marketing Strategy 16 Product 16 Price 17 Place 17 Promotions 17 People 18 Process 18 Physical Evidence 18 Conclusion 19 Recommendations 20 References 22 Annexure 25 Part A Introduction The dynamics of international trade and business is changing with time. Globalization is the primary reason behind such changes and this has also brought multiple improvements in the field of international trade and business. The business organizations have become more conscious as competitiveness in the global market has been increasing significantly. Besides, the regulatory bodies of different economies are supporting the free trade policies that also led to intensified degree of competition level. In this respect, Hope and Maeleng have identified the free trade policies as “competition-enhancing device” as these policies enables companies to enter into new markets with greater opportunities (Hope and Maeleng, 1998, p.52). However, when companies decide to expand their business internationally, they have to take many factors into account for success in the foreign market. There are significant differences between the natures and features of domestic market and international market due to cultural diversity, different macro-environmental factors etc. This paper will attempt to deal with international market planning strategy for Emirates Airlines. The primary aim of this paper is to offer a set of actionable and plausible strategies to Emirates Airlines for Indian airline industry. In order to meet this aim, this paper will present an extensive discussions, analyses and findings based on which a set of relevant and effective recommendations will be formulated. This paper will be presented in two parts. The first part will present a brief analysis of company, its product or service and macro environmental analysis of Indian economy with respect of airline industry. Second part will include strategy formulation for marker entry based on the outcomes of analysis. About the Company Emirates Airlines is the largest air travel service company of the Middle East. Sheikh Mohammed bin Rashid Al Maktoum and Mr. Flanagan took the initiatives for starting an airline travel services and they founded a company called Emirates Airlines in 1984. With the rapid enhancement of Dubai economy, Emirates Airlines kept growing and expanding its marketing in different parts of world. Soon, the company brought several notable improvements in their operational and services quality. Within 10 years of its inception, the company entered into European and African market in 1995. Currently, the company is considered to be one of the most premium air travel companies in the world. In 2009, it has also become the largest Boeing 777s operator as it owns seventy-eight B777 aircrafts (Emirates-a, 2011). Emirates Groups is the parent company of Emirates Airline and the parent company has more than 50 business units in all over the world with nearly 50,000 workforces. Currently, Emirates Airline owns more than 156 aircrafts that values around US$ 50 billion. “In the financial year 2007/2008, Emirates carried 21.2 million passengers and 1.3 million tonnes of cargo” (Emirates-b, 2011). The financial condition of the company is very strong as it has captured a large portion of market share in global air travel industry. The following figure shows the geographical revenue of Emirate groups. Figure 1: Geographical Revenue in Percentage (Source: Emirates Group, 2009-2010) As per the figure, the company earns 27.9% and 27.3% of total revenue from the East Asia & Australia and from Europe respectively. The following table shows the key financial indicators for Emirate Groups for the last two financial years. Figure 2: Emirates Groups (Source: Emirates Group, 2009-2010) As per the above figure, there has been financial growth in financial year 2009-2010 comparing to 2008-2009. Due to increase in overall revenue, overall profit has increased significantly. Product or Service Analysis Emirate Airline is a premium air line service provider. The primary factor for its rapid success in the global market is its best quality services. The company has been able to deliver value added services to its worldwide consumers. The main strength of its service is that the company has largest coverage area. It is the world’s fastest growing airline and serves more than 100 destinations across the six continents (Emirates-c, 2011). In order to achieve higher satisfaction level and higher consumer retention, the company has incorporated many facilitates along with air travel services. The company strives to make its consumers’ travel experience more relaxing, comfortable and enjoyable. It has categorized its services features into three segments i.e. first class, business class and economy class. These three classes of services help to target and serve different groups of consumers (Emirates-d, 2011]. It has also implemented technological innovations in its services. It offers value added facilities such as better cabin features, in-flight entertainment, dining for all class, staying connected, chauffeur-drive etc (Emirates-e, 2011). Along with comfort, safety of the consumers is another major concern for the company and hence, the company tends to operate the youngest fleets for its air travel services. Its fleet consists of latest Airbus and Boeing aircraft like Airbus A340-500, A340-300 & Boeing 777-300ER & 777-200LR (Emirates-f, 2011). Environmental Analysis PESTEL Analysis Macro-environmental factor influence any business and in case of multinational business, it becomes vital. In order to develop international strategies, it is very necessary to assess external macro-environmental factors. In this respect, PESTEL analysis is an important management tool to identify the influence of macro-environmental factors on trade business. PESTEL includes six major aspects of macro-environment i.e. political, economic, socio-cultural, technological, environmental and legal (Dransfield, 2004, p.445). These factors are analyzed for Indian air travel industry. Political: Politically, India is a stable country and it is the world’s largest democratic nation. Indian Government is a federal republic where chief of the state is the President and head of the Government is Prime Minister (CIA, 2011). The Indian Government has developed a national department for regulating the commercial and non-commercial civil aviation known as ‘Ministry of Civil Aviation’. In order to control this industry, it has imposed a set of policies and regulations. The policies strive to bring developments in various aspects of airline industry like domestic airline, infrastructure, and international policies for air travel etc. However, terrorism is a major threat for the Indian economy as well as for its airline industry (Weaver, 2010). Economic: India is developing nation and it is also one of the largest and potential markets in the world. The enhancing economic condition is the one of the major factor for such market exposure. India is the world’s fifth largest economy in term of purchasing power parity GDP as it was recorded $4.046 trillion in 2010. The economy has achieved 8.3% real growth rate for GDP in 2010 in comparison to 7.4% in 2009. However, due to huge population, the per capita GDP of India is very low i.e. $3,400 (CIA, 2011). Annexure 1 depicts the average household income of India and it shows that disposable income in Indian middle class family is rising constantly. Socio-cultural: India has the second highest population in the world and entire country is culturally diversified. During 2010, the population was around 1.17 billion and 29% of total population belongs to urban area. Major region group include “Hindu 80.5%, Muslim 13.4%, Christian 2.3%, Sikh 1.9%” and others like Buddhist, Jain, Parsi etc (U.S. Department of State, 2010). The literacy rate of this country is comparatively low to that of other developed countries. Nearly, 61% of total population is literate while male and female literacy rate is around 73.4% and 47.8% respectively (CIA, 2011). Due to diversified culture of Indian consumers, it is quite difficult to serve each type of consumers. Technological: With the growth of economy, India is advancing in technological expertise. The Indian government is encouraging trade & business to implement latest technological expertise in their daily operation. In this respect, the government is focusing on the technological education for creating better future in the field of technology. The infrastructural development is the most important strength for the growth of trade and business in the Indian economy. In recent years, India has shown a tremendous performance in communicational and transportation infrastructure. In India, there are 35.77 million and 670 million people are using telephone main lines and mobile cellular. The number of internet users are also very high i.e. 61.338 million. Hence, internet marketing and e-shopping has become a trend in the Indian business market. The government has also established 352 airports that include 249 & 103 airports with paved and unpaved runways respectively (CIA, 2011). Environmental: The Indian government does not seem to be strict regarding the environment protection law. The policies imposed by the Indian regulatory bodies for protecting the environment are not effective. However, the government has imposed certain laws on the industries for the betterment of environment. Legal: Indian Government is the main regulatory body for controlling entire trade and economy. It has developed a set of legal framework for guiding the organization in practicing ethical business. The legal framework for aviation industry is based on “Aircraft Rules, 1934” and “Aircraft Act, 1934(XXII of 1934)” (Ministry of Civil Aviation, n.d.). Part B Summary of Part A The primary aim of this paper is to offer a set of plausible recommendation to Emirate Airline for developing international marketing and planning strategy for its Indian market. In this respect, it is very necessary to understand the main operational area of Emirates Airline and the services that it offers. Emirate Airline is the largest air travel company of Middle East region. It is the Dubai-based company and it is present in most of the global markets. Since its inception, the company has experienced a rapid growth that makes the company’s financial position very strong. Europe, East Asia including Australia is the major market for the company as it receives more than 50% of its total revenue from these markets. The primary reason for its success in international market is its high quality and innovative service. The company’s service strategies target a large number of consumers from global market. It has incorporated innovative features in its services quality that has improved their consumer satisfaction and consumer retention rate. To develop international strategy for Emirates’ Indian market, macro-environmental factors have been analyzed. Indian is the largest democratic nation with second highest population in the world. The country is politically stable and Government regulates entire trade and business related affairs. Growing economic condition is major opportunity for airline industry as people’s disposable income is rising. An infrastructural development is another strong area for Indian economy. However, the country is culturally diversified and hence, understanding the behavior of each type of consumer is quite tough. Market Audit The increased aspect of competition within any industry makes it essential for firms to review their marketing strategies. This is important because of the large scale fluctuations in the consumer preferences which call for the need to ensure greater adaptability and efficiency among organizations. Marketing audit is a tool that is being largely used by present day business organizations to review their marketing strategies due to the turbulence in the market. Part o this has been attributed to the aspect of enhanced competition which has been often linked with globalization where organizations are breaching geographical and political boundaries to reach out to new market segments. In this process marketers are essentially making new strategies so as to grab a share of market from the competitors. A marketing audit is essentially defined as “a systematic, critical and impartial review and appraisal of the total marketing operations and strategies of an organization” (Sweeny, Berl & Winston, 1989, p.125). A marketing audit essentially serves to evaluate the existing policies and the objectives and their basis as well as identifies new opportunities, weaknesses and finally suggests certain recommendations so as to take care of the issues emerging out of the audit (Sweeny, Berl & Winston, 1989, p.125). In case of Emirates airlines a marketing audit would include aspects like internal environment, effect of competitor’s strategies, change in market dynamics etc. The following portions would cover an in-depth analysis of the airline’s present marketing strategies so as to identify any possible gaps in the service offering of the firm and the needs of the market in the changing market scenario. Analysis of Micro Environment Market Analysis The global airline industry went through turbulent times in the previous years due to the impact of the recent financial crisis when the demand for air travel reduced considerably due to decreased spending by business class and corporate travelers. A research report conducted on the global airline industry values this industry segment at approximately USD 920 billion with a compounded annual growth rate of approximately 8.7 percent between the years 2005-09. The report also depicts a comeback trail for the market players of this industry segment as the global economy shows positive signs of resurgence. The United States remains the largest market commanding a mammoth 59 percent of the global market closely followed by Europe (22 percent) and Asia-Pacific region (22 percent). The report foresees a compounded annual growth rate of 5.3 percent for the entire industry for the period beginning 2009 to 2014 (Clearwater & IMAP, 2011, p.5). Figure 3: Forecasted GDP Growth rates (Source: Clearwater & IMAP, 2011, p.5) The report shows considerable growth potential for emerging economies like India and China as destinations for profitable market investments. The Indian market in particular shows large scale opportunities for Emirates airlines. Statistics suggest that in the year 2009-10 the nation recorded 34.37 million travelers in the international segment alone (Dhopatkar, 2010, p.50). Figure 4: Worldwide Aviation Industry Growth Rates (Source: Kingfisher Airlines, 2010, p.20) External Analysis Customer Analysis Presence of large number of consumers in the international arena has provided a host of opportunities for the consumers. In case of international travelers cost is one aspect that is very important in case of Indian consumers as they look for cost effective options. Connectivity is also another major issue in the context of international travelers. Emirates offer a good option as it provides a good and efficient service at affordable rates to the consumers. The hub and spoke model of the airlines serves to take care of issues of connectivity. The airline also covers all the major Indian cities which make it an obvious choice for Indian consumers. Competitors The liberalization policy adopted by the Indian government has led to a spurt in the growth of international carriers operating out of the nation. Public sector behemoth Air India is the largest market player in the international segment. The Indian aviation sector has also seen a rise in the levels of mergers and acquisitions with the most prominent being that of the merger of Indian airlines and Air India to create an airline mammoth. Private players have also been allowed to run international flights which has enhanced the level of completion prevailing in the Indian market (refer annexure 2 for market share of existing players) (InterVISTAS-EU Consulting Inc, 2009, p.14). SWOT Analysis Strengths The major strengths of Emirates airlines in India are stated below: 1. Good connectivity across all major cities in India 2. Formidable brand image 3. Efficient service Weakness 1. High cost 2. Inconsistency in service Opportunities 1. Location advantages of Dubai which serves as the hub for its hub and spoke model 2. Presence of large pool of resources 3. Large customer base Threats 1. Government regulations 2. Threat from existing indigenous players Preliminary Marketing Strategy Marketing strategy for a market player in the airline industry in an international market can be formulated by analyzing the service mix for the organization. The service mix constitutes of the following aspects namely product, price, place, promotions, people, process and physical evidence. Product Product strategy implies the product features that distinguish the offering of an organization with those of its competitors. In case of the Indian market, Emirates must frame a product strategy that would tend to provide a good connectivity to the consumers. The hub and spoke model with Dubai being the hub could serve as a major product offering considering the good brand image of the airline in the mindset of the consumers. The airline also has a fleet of highly modern and advanced aircrafts which could be used to effectively target the Indian market audience. Adding a touch of local flavor could also help in gaining a better consumer confidence for the organization. This could be accomplished by introducing local cuisines on long haul flights, welcome note by the cabin staff in the local language by the airline staff etc. Price Indian consumers are highly price conscious which is particularly applicable to the non-corporate consumers. The pricing structure should be such that the consumers find greater value for every monetary resource spent by them. Pricing strategy of the airline can either be a premium pricing strategy, value for money strategy or a low priced strategy. A mix of value for money and premium pricing strategy could be used in the Indian market. This can be in the form of the presence of an economy class intended for the value for money segment and the business class intended for the premium segment consumers. Place Place implies the location at which the product or service is actually delivered to the consumer. Emirates must target all the important cities of the nation apart from the national capital so as to gain customers from every area of the nation. This is even more important in the Indian context considering the vast geography of the nation. It is also important to note that the national carriers of India namely Air India operates only out of selected cities hence having operations in multiple locations would help the firm to grab location based advantages from the rest of its competitors. Promotions Promotions serve as one of the most important aspect that is being used to attract the consumers. Promotions are important as they form the linkage between an organization and its target market audience. Any distortion in the message to be communicated could lead to issues of positioning within the organization. This would have long term effects on the brand image of the firm. The choice of channel also assumes importance as it reflects the ability of the organization to effectively reach out to its target market. In case of the Indian market marketing communication channels like television, print media including newspapers and magazines, sponsorship of major events could be used to target the market audience. Advertisements could also include induction of local personalities as brand ambassadors which would introduce a local flavor in the promotional mix. People People constitute the employees of the organization who would actually deliver the service to the customers. This aspect assumes importance considering the fact they serve as the mode of direct contact of the organization with the consumers. Presence of a well trained and motivated staff which includes cabin crew, ground staff and an efficient customer service helpdesk would contribute towards positioning the firm effectively in the minds of the consumers. Process Process implies how the service is actually delivered to the consumer. An efficient service constitutes the most important of all the elements of the service mix in the case of the airlines industry. Efficient processes like online check in, multicity flying options, hassle free luggage transfer and other such aspects could contribute towards creating a favorable image of the organization. Physical Evidence Physical evidence constitutes the tangible aspect of the service offering. It serves as an indicator of the level of service provided to the consumers. In case of Emirates airlines physical evidence would include cleanliness of aircrafts, behavior of the staff and hassle free check in process at the airport. In case of transit passengers for the hub and spoke system an efficient service quality would include smooth transfer and check in at the hub airport as well as emigration and other such related issues. Since online bookings are a huge hit in the Indian market hence presence of a good web portal is also essential for creating an image in the minds of the consumers. The service offering of an airline industry market player can be of three types namely the core service, supplementary service and augmented service. The core service for Emirates would consist of transporting goods and passengers efficiently over long distances effectively. Supplementary service would include enhanced services such as online web check ins, multi city transit options, special fares for different sections including a special package for frequent fliers and corporate customers etc. Augmented services are those which a firm provides to the customer in addition to the demands of the consumer. This reflects the efficiency of the firm to effectively retain the loyalty of the consumers. This is more important in case of the airline industry considering the fact that there are a large number of market players. Emirates can provide augmented service by highlighting its fleet of efficient aircrafts which offer greater comfort and luxury to the consumers. Emirates could showcase its large long haul aircrafts like the Airbus A 380 which are not available with any of the national carriers in India. These strategies could be used to gain customer confidence and would also create differentiation with the competitor’s product and service offering. Conclusion This paper has dealt with formulation of international market planning strategy to penetrate a new market. The formulation of international strategy is a critical task and it involves a set of chronological steps. This paper has demonstrated these steps for developing international marketing strategies with respect of Emirates’ Indian market and these steps have been presented in two parts. The first part has disclosed the influence of macro-environmental factors on Indian airline industry. Overall analysis of Indian market depicts that India is a growing market with a huge number of potential customers. Consumers nowadays prefer air travel as their disposable income is rising significantly. The second part has presented market audit, preliminary marketing strategy and recommendations based of the entire analyses and discussions. Indian airline industry has greater potentials as market share of the international players are high and Emirates have gained an upper hand position in the respect. Government policies and competition from domestic and international players are the challenges for Emirates in India. Moreover, the company also needs to understand the Indian consumer’s behavior. The country is highly diversified and consumers’ tastes and preference is changing with economic development. Therefore, it becomes quite difficult to trace their changing behaviors. Emirates Airlines is a stable company with multiple competencies. The company must use its major strengths to cater to the Indian market. It must maintain a better and efficient long term transportation services in the Indian market and it should try to offer lower price service targeting the Indian middle class family. Recommendations The analysis of the marketing strategies of the company as well as the environment analysis reveals considerable market potential for the participants of the airline industry. The tremendous growth rate of the Indian economy provides large scale opportunities for Emirates Airlines to establish its market presence in the nation. In addition, the formidable image of the airline coupled with its efficiency and availability of a large pool of resources would ensure an effective image of the organization in the minds of the consumer. In order to better position the firm in the minds of the consumers, an effective product mix could be adopted. Emirates could create a perception mapping which would help in analyzing the gaps between the services offered by the firm with respect to its competitors. In addition, the firm could showcase its long term expertise in the industry by using its technological expertise. The analysis of the market also reveals presence of numerous strategic issues like government norms. The main competitors for the airline in the Indian market consist of public sector undertakings. In addition the Indian government also has a policy of protecting the interests of the domestic players in the market. This highlights the need for the organization to formulate effective strategies that would help the firm to establish itself in the wake of stringent entry barriers. Finally the firm must also adopt a ‘glocalisation’ approach of thinking globally and acting locally. Under this strategy, the firm must pay considerable importance towards the local sentiments and cultural beliefs of the target market population. This is even more important for the Indian market considering the rich cultural heritage and the natural inclination of the Indian consumers towards their culture. Adopting such strategies would not only help the firm to establish itself in the market but would also provide long term sustainable advantage to the organization in the long run. References CIA. February 14, 2011. The World Factbook: India. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/in.html. [Accessed March 01, 2011]. Clearwater & IMAP. 2011. Aerospace Global Report 2011. [Pdf]. Available at: http://www.clearwatercf.com/pdfs/Aerospace_Global_Report_2011_%28A4%29.pdf [Accessed on March 01, 2011]. Dhopatkar, V. 2010. Indian Aviation Industry. [Pdf]. Available at: http://www.medcindia.org/Digest/October/vidya.pdf [Accessed on March 01, 2011]. Dransfield, R. 2004. Business for Foundation Degrees and Higher Awards. Heinemann. Emirates-a. 2011. Our History. [Online]. Available at: http://www.theemiratesgroup.com/english/our-company/our-history.aspx#y2009. [Accessed March 01, 2011]. Emirates-b. 2011. The Emirates Story. [Online]. 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January 22, 2010. Indian airports on alert over hijack threat. [Online]. Available at: http://www.guardian.co.uk/world/2010/jan/22/indian-airports-alert-hijack-threat. [Accessed March 01, 2011]. Annexure Annexure 1: Average household disposable income (Source: JumpStart Productions, 2008) Annexure 2: Market Players in the Indian Aviation Industry (Source: InterVISTAS-EU Consulting Inc, 2009, p.14) Read More