Aero VIP: International Expansion Strategy and Management Challenges

This business report analyzes the international expansion strategy of Aero VIP, a Portuguese airline company, focusing on its entry into the Argentinian market. It examines the company's competitive strategy, organizational structure, operational control, production and distribution, and human resource management across borders. The report identifies key issues and opportunities for management and provides recommendations for improvement.

Research paper – 2
Business Report
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Table of Contents
Introduction......................................................................................................................................3
Company’s overview and current operating position......................................................................4
Review of company’s international competitive strategy...............................................................5
Existing organisational design structure and control issues............................................................7
Entry strategies used to enter other regions/countries.....................................................................9
Operational control, production and distribution/supply chain management................................10
Management of Human Resources across borders........................................................................11
Identify key issues or opportunities for management....................................................................12
Recommendations to management for improvement....................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
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Introduction
Business growth and expansion is a significant aspect for any business to maximise sales, profits
and revenues. Internationalisation is a part of a business expansion which delivers a wider area to
develop business activities on which this business report will explain more. International
expansion of any business creates needs for changes in different strategies which will be
analysed in this report. This report is based on the Aero VIP which is a Portuguese airline
company which provides Air transportation, Aircraft rental etc. services on the regional and non-
regular basis. This business report is based on the expansion of business of Aero VIP in
Argentina. This report will provide an overview of the organisation by highlighting its current
operating positions. After this, the report will make its focus on the competitive strategy and
organisational design structure adopted by the company. It will also analyse the market entry
strategies used by the company to enter a new market. Operational control, production, supply
chain management strategies and IHRM will also be evaluated in this report. Key issues and
opportunities will be analysed in this report on the basis of recommendations will be provided.
Figure 1: Logo of Aero VIP
Source: AERO VIP, 2018
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Company’s overview and current operating position
Aero VIP is an independent regional Portuguese airline operating company which is mostly
providing its services on regional routes. The company is providing significantly their services in
between the island of Porto Santo and Funchal. This company is a part of the “Grupo Seven Air”
company working in the same field. Seven Air Group is one of the biggest aeronautical groups
which are working in Portugal and in other regions to increase their services. This company is
providing air transportation services for passengers and luggage. These air transportation
services are provided in the regional and non-regular areas where the company is not operating
its regular services (Correia, 2014). Fleets and flights are available for hire for different regional
routes for passengers and luggage transportation. The company is also providing other services
e.g. licence revalidation, fuelling, flight instruction services to other flight operators and owners
in the Portuguese. The company is also providing ground handling services to the other aviation
company which has not regular operations in Portugal. Ground handling service contains the
servicing of an aircraft when it is on the airport or ground parked on the terminal gate. All of
these are operations are continued by the company in Portugal for those flight operators which
are not having their regular operations to Portugal.
The Aero VIP was established in the year of 1999 started two types of service one were LAPA
VIP and another was ARG express. Company’s operations were suspended in the year of 2004.
Aero VIP is currently operating their services in Portugal and Argentina (Correia, 2014). Buenos
Aires is the current base of the company in Argentina where the company is operating their
regional flights and passenger services. The main base of the company in Argentina is Ezeiza
International Airport also situated in the Buenos Aires.
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Review of company’s international competitive strategy
Airlines industry has a high market competition due to different companies and big business
groups are working in this sector. It is essential for each and every company to develop some
competitive edge in their services to enhance their potential to beat the market rivalries in an
effective manner (Albers and Heuermann, 2013.). Many of the company is focused on the
regional services but most of the companies are providing its services into the international
market which create limitations to those airlines companies which want to expand their services
into the international market. Aero VIP is also working in the regional market and they are
providing services to regional and non-regular destinations.
The company has defined a separate market segment in which they are providing their services
to develop profits. They are working in the regional markets to provide fleets and flight services.
The company is also providing rental ground services and fuelling services to other airlines
companies to in Portugal. The company is providing passenger services in the regional and non-
regular areas in which the company is having a strong grip. Aero VIP has expanded its business
in Argentina also now they are operating from Portugal and Argentina both sites effectively.
Different companies are working in Argentina also to provide rental flight and fleets.
It is essential for the company to provide maintain their profits business operations profits so that
they are providing or retaining some other kinds of services in Argentina also to beat the market
competition and keep profits in their business operations. The Aero VIP has used vertical
integration for effective expansion of business in the new market by which they can establish
whole business activities on its own (Doganis, 2013). The company is also providing other and
most relevant flight services to other companies also in Argentina to maintain their profits and
revenues in the new market also. It is an effective strategy which is adopted by the company to
maintain regularity in the business operations. The company is providing ground services to
other airlines companies in Argentina which have increased Aero VIP integration in the business.
Vertical integration is the most effective business expansion strategy which enhances the
potential of the organisation to operate, manage and control all of the business operations on its
own (Altomonte and Rungi, 2013). Organisations which are working in this industry just focus to
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connect new destinations by their flights by which they can enhance a number of passengers. But
other operations which are needed to manage and control are not merged in the international
expansion of the business for Airlines Company. Aero VIP has used the vertical integration in
which they have expanded all the services which are needed to expand the business of an airline
company. Fuelling, ground service, regional flight service for non-regular routes etc. are used by
the Aero VIP in the new market expansion which has helped to beat the market rivalries.
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Existing organisational design structure and control issues
It is essential for the company to use an effective organisational structure in the management
which can help them to manage and control their employees effectively. An organisational
structure is given below which is used by the Aero VIP to manage and control their employees:
Figure 2: Organisational structure of Aero VIP
Source: Author
A proper hierarchy is developed by the company to manage and control their business
operations. A tall hierarchy is designed by the management in their organisational structures
which have supported to the company in the managing their operations take decisions. Board of
directors is in the higher position of the organisational management structure (Bolden, 2016).
Board of directors has determined the vision for the company which has helped to make
decisions and develop strategies in different areas. The international market expansion,
enhancement of services etc. are decisions are taken by the higher management in the Aero VIP.
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Board of
Directors
Executive
committee
Quality
assurance
Chief flight
operations
officer
Corporate
safety
Chief cargo
officer
CEO
Technical and
fligh training
Training
executives
Legal
Legal
executives

The executive committee and CEO are working under the board of directors in the company
which provides and support to take effective decisions on the higher level of management and
strategically level of issues. It is essential for the company to take effective decisions to manage
and control their business operations effectively in the Portugal and Argentina also. The
company is providing aircraft services for cargo and passenger in the regional routes so it is
essential for the company to manage their fleets effectively to maximise their operations in these
routes. Either its, the company is also providing their services for non-regular routes in which
they are also having a need for management to manage profitability. It is essential for the
company to have a futuristic approach to their decision making and strategy development in
which board of directors, CEO and executive committee have a prime role. Directions are
determined by the higher management of the company which helps in managing profitability in
the operations. Different problems related to the higher level of management are also resolved by
the CEO and executive committee level by strategical resolution (Harper, 2015).
Different departments are developed in the hierarchy management which helps to manage and
control business operations (Yukl, 2013). Flight officer, cargo officer, ground working staff
manager etc. are the different departments which have their own roles and responsibilities in the
company. They are significantly working to manage and control their business operations in
Portugal and Argentina. Targets and objectives for each and every year are determined by the
board of directors of the company according to which they decide individual and team’s target
which develops company’s performance. Aero VIP does not have a specific communicational
path to communicate on the different level of management which sometimes creates problems
and issues related to manage and control the teams and operations.
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Entry strategies used to enter other regions/countries
Market expansion is required for any company to enhance their potentials to generate more
profits. The international market provides huge opportunities which can be used by the company
to expand their profits and revenues. Either this, it provides an opportunity for betterment in the
internal process of working, produced products and services (Johnson, 2016). Aero VIP has
expanded its business from Portugal to Argentina in which they have used effective market entry
strategies. Some of the strategies are given below which can be used by the company for its
international market expansion:
Partnership: Aero VIP can develop a partnership with the companies which are working in the
airline's industry to expand its operations in another nation. It is effective to develop a
partnership with those companies which are also working in the same industry and have
experience of operations of the airline industry in the foreign country. Marketing and sales
related trends can effectively analyse the partnership of the company in the foreign nation
expansion of the business (Maekelburger, et. al. 2012).
Franchisee: It is an easy way to enter a new market to expand business operations. This strategy
is used by different companies which have differentiation in the business concept. Under this
concept, the company can allow business groups to work according to their business concept and
by using their brand name in the terms of fixed amount, profits and time period. In this strategy,
the company have to find those interested business groups which are agreed to work under their
brand name (Martorell, et. al. 2013).
Licence: Aero VIP can expand their market in the foreign country by the use licensing strategy.
A company which belongs to the foreign market and have potential to fulfil the requirement of
the Aero VIP could work under the brand name of AERO VIP. Both companies have to develop
a contract to provide a licence to work under the brand name of the company according to their
instructions (Laufs and Schwens, 2014).
All of these market entry strategies are effective to be used by the Aero VIP to enter the new
market.
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Operational control, production and distribution/supply chain management
It is essential for the Aero VIP to maintain and control their business operations in the Portugal
and Argentina. The company has different operational teams which are working to manage and
control their business operations. A proper team is developed by the company which is
effectively working to manage and control. Aero VIP is providing their rental services on non-
regular routes and different regions which are managed and controlled by the fleet management
team. It is essential for the company to maximise the use of their fleets to manage profitability in
the operations. The company is also providing their services on the Buenos Aires airport to other
airlines companies for fuelling and ground services. A state department is working to manage
and control these operations in the both Argentina and Portugal. These are the basic services
which are provided by the company on regional routes of the countries.
The company has used online distribution channel for booking of their flights and fleets for a
specific destination to transport passengers and luggage on the non-regular routes in the regional
areas. Online booking is effective to use for the company which helps them to target a large
market in both countries. Paypal etc. different methods are used by the company for payments
and bookings of flight for transportation (Alternative airlines, 2018). A full booking option is
provided by the company for a flight. Different size of flights and charters are available and
according to the needs, customers can book charters and flight for their individual use. The
online distribution channel is used by the company is effective for the company to manage their
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Management of Human Resources across borders
It is essential for the company to use appropriate HRM policies in the foreign countries which
can help them to effectively manage their employees. Aero VIP is Portuguese company so it is
essential to make changes in their HR management in the foreign country expansion. Cultural
diversity may rule on the foreign expansion of the company so it is essential for the HR
management to make changes in their policies. Firstly, Aero VIP has to recruit and select the
people belongs to the local community which can help them to relate their company to the local
market. It also helps to the company to analyse the trends of the foreign market by which
company can make changes accordingly. Analysis of market demands is also analysed
effectively by the recruitments of locales. Diversity management is essential for the HR
management which is possible by the use of effective HR policies. A proper training has to be
provided by the HRM in the Aero VIP to those people belong to a foreign country to learn their
organisational policies and culture.
Compensation policies also have to be changed according to the foreign country which can help
the company to provide effective remunerations according to their needs. It is essential for the
company to engage people effectively in the work by communicating with them to resolve their
issues. On the job, the training method is also used by the company to assign a mentor to resolve
any kinds of problems and issues which they face in the organisation. Aero VIP should use
international HRM policies which can help them to effectively engage people in the company
and enhance business effectively in the new marketplace (Briscoe, et. al. 2012).
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Identify key issues or opportunities for management
Different issues are faced by a company in the process of expansion of business in the foreign
market. It is essential to overcome these issues which also work as an opportunity for the
company to growth in the foreign market. The effective and lenient process of working is
required for the organisation in the expansion of the business in the new country to maintain a
flow of operations in the new country. It is essential for the company to identify the issues
involved in the management which has to be resolved effectively. Some of the issues related to
management are given below which can lean on the Aero VIP in the expansion of business in a
foreign country:
Communicational gap: It is essential for the company to bridge the communicational gap from
the management in the expansion of the business in the foreign countries. Recruitment and
selection of the locales in the company create a problem of communication due to cultural
diversity. It effects on the organisational performance according to the set targets and objectives.
Employee’s engagement: Foreign expansion of business drives different management related
problems in the company which is essential to resolve as soon as possible to restrict the negative
effects on the organisational performance. Cultural diversity leads to the employees which also
belong to the foreign country in which company has expanded its business.
Above given problems are related to the management and it is essential for the company to
resolve these issues effectively which can help to the Aero VIP to perform effectively according
to the set targets.
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Recommendations to management for improvement
It is essential for the company to develop and use effective solution for identified problems
which can help to Aero VIP to develop their management effectively. It is essential for the
company to analyse the cultural difference and diversity in the expansion of the company in the
new market. A person who belongs to the local country in which company has expanded its
business is essential to engage effectively. So management has to develop employee’s
engagement programmes in the company which can help to engage those people effectively in
the company. Some of the recommendations are given below for the Aero VIP to resolve their
identified management issues in the foreign expansion:
Communication plan or path: Aero VIP has to develop communicational path in the foreign
country to communicate effectively with the newly recruited employees. Use of local languages
and terms in the communication has to be enhanced by the company which can help to
encourage and engage people.
Employee’s engagement activities: Aero VIP should use employee’s engagement activities in
the company which can help the company to enhance their performance by engaging employees.
Team games and parties have to be organised by the management to engage people effectively in
the organisation (Reissner and Pagan, 2013).
Defining policies and targets: It is also effective technique to engage people in the work by
defining working and other policies to the employees by which they can perform accordingly.
The company should also define individual targets for working which can help the employees to
perform according to the targets which can help the company to enhance performance.
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Conclusion
On the basis of above report, it has been concluded that it is significant to develop a competitive
edge in the workings of any organisation. Vertical integration is effective for the companies
which are intended to develop their own set up without depending on the subsidiaries. Vertical
integration of the company enhance potentials to survive in the new market and as well as to
enhance profits. The effective organisational structure provides a proper control of the
employees working on the different level of management. A proper hierarchy is effective to
manage and control business operations. Effective market entry strategies underpin the success
of the organisation in the foreign market. Communication is a significant aspect of the
organisation to manage in the company which is related to the management which enhances the
performance by engaging employees effectively in the work.
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References
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https://www.alternativeairlines.com/aero-vip [Accessed on 23 May 2018].
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https://www.alternativeairlines.com/why-use-us [Accessed on 23 May 2018].
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Management, 32, pp.217-227.
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 Reissner, S. and Pagan, V., 2013. Generating employee engagement in a public–private
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 Yukl, G.A., 2013. Leadership in organizations. Pearson Education India.
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