International Strategic Alliances in the Airline Sector

This report provides a critical review of the literature on international strategic alliances in the airline sector, discussing motivations, benefits, challenges, and alternative market entry strategies. It focuses on the Oneworld alliance and its partnership with British Airways.

Individual Academic
Report
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EXECUTIVE SUMMARY
Over the last decade the scenery of the international business environment went into
numerous substantial changes and this trend gives rise to the International strategic alliances.
After the globalisation the Inter- firm collaborative strategies have infused the global business.
Airline alliances are the booming trend which is growing over the last few years to a practise an
interregnal part of the passenger industry. The one of the greatest airline alliances is the
Oneworld who has partnered with the British Airways and many more. Following report consist
an in-depth literature review of the strategic alliances in the airline sector and after that a critical
evaluation of the various determinate which would be discussed in the literature review section
in order to get into a specific point of action. Also the following report discuss the suitable
alternative market entry stray as the recommendation strategy for the concern company.
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Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................2
Literature Review.............................................................................................................................2
Critical review of the literature related to the use of international strategic alliances in foreign
market expansion........................................................................................................................2
The motivations behind the formation of the selected International strategic alliance...............3
A critical assessment of the benefits and challenges of the international strategic alliance
selected to the partners involved.................................................................................................4
A suitable alternative market entry strategy in your recommendations......................................5
Analysis and discussion...................................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10
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INTRODUCTION
International business has seen various sustainable changes in the last few years and after
the globalisation there is growing trend of the strategic alliances. It is a strategic business
arrangement where two or more organisation only for their mutual profits comes under the forms
of cross licensing and joint research and development where they are marketing each one product
by using the same existing supply chain channel. Strategic alliances is done to gain the benefit of
the ease entry this is because international strategic alliances might present a ways to overcome
the barrier for that entry that hinder the one company’s international expansion strategy. In the
last few decades of the international aviation, the global strategic alliance have come out to be as
the one of the significant form of cooperation between the airlines. It has argued that the strategic
airline alliances are said to be as the intentional contract between the carrier with ain to enhance
their global competitive position without compromising with their economic independepende.
Oneworld is a kind of airline alliances with an objective to become as the first choice airlines
alliances for the global recurrent international traveller (Wang and et. al., 2021). Therefore,
following report will discuss the various attributes of the international strategic alliances which
many international business are using for the market expansion.
Literature Review
Critical review of the literature related to the use of international strategic alliances in foreign
market expansion.
As per the dynamics of Chatterjee, Mukherjee and Datta (2021, they have defines the
strategic alliances as the collective procedure among the firms in the different countries.
Moreover, the international alliances is an international market expansion strategy which can be
categorised along the multiple dimensions. However, it has been critically reviewed that the
International strategic alliances are becoming the vital part of the many airline company’s
international business strategies. Hence, it is critically stated that the international alliances are
acting as the strategic weapons for the many organisation and this trend gain more importance in
the airline sectors (International Strategic Alliances, 2019). It has been critically analysis that the
alliances is said to be as the voluntary contract among the various airline to pool the resources.
This strategically moves provided many opportunity in form of foreign market expansion entry
without any obstacle and extended the capability of the many airline companies to compete with
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the other top most airline companies. For a business moving into the foreign soil for the market
expansion strategy sees a very few possibilities for them to competing with its own resources and
capabilities and yes the surviving along is also being decreasing every day. In airline sector,
strategic alliances is said to be as the bilateral or multiple contract which serves the guidelines
for operating the business in the meaningful manner.
Moreover, Button (2020), had been critically evaluated that the participating in a alliances
is not only overseas market expansion strategy but it also improves the business efficiency of the
many large airline companies but it also greater opportunity to many small airline to operate
beater in comparison to the larger one. The airline company like British airways merged with the
Oneworld with many other companies with a strategical aim of mitigating the negative vibes
which caused by the independent d and increasing of its activities. As there is extensive
competition and the rising of the new markets, Oneworld are intensifying its efforts for reaming
completive in the foreign market. Hence, through increasing gate international partnership and
alliances they can strengthen their potion and can reduces the risk of investment which they are
taking while operating independently,
The motivations behind the formation of the selected International strategic alliance.
In the views of Boniecki and Marciszewska (2021), it has proposed that the many
established traditional international business are applying various ample business strategies and
the one of the widely adopted strategy for the market expansion is the strategic alliances. The
foremost strategic alliances in the international marketing is turning into the norm in the modern
competitive as this alliances are leveraging to the growth market expansion and development
hence both the merging partner get benefited with this alliances. Moreover it had been critically
synthesised that the primary motivation of the adoption of the strategic alliances by the Oneword
as they do it by licensing a contract in which rather than taking much financial risk and wasting
more time and capitalising more in order to take the combative edge in the business as it is the
process by which they are entering into the market via finding the same business partner that
having the same business in the other country. Moreover, interaction strategic alliances also
facility easy international market entry capability to the business. It has found that international
strategic alliances in the airlines is consider to be as the weapon (Discuss the Motivation for
International Strategic Alliances, 2019). This is because the main motivation behind adoption of
this international market entry as the busier strategy is that this enable the company and the
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partner to share the knowledge, abilities& capabilities and the expertise in order to get the
competitive edge in the global aviation sector.
Moreover, after the Brexit, it has becomes hard for the both EU and UK country for the
market expansion as there is high entry barrier which is discouraging the many carrier
companies, so in this circumstances Oneworld can build the strategic alliances and network with
small and big brand like British Airways in order to level this fence. Moreover as it just noted the
international airlines are the subject of the controlling the foreign direct investment as these are
the vestige of security concern in the mood 20th century (Fu, Huang and Liao, 2020). Moreover,
in strategically agreement the bilateral contract may save them from operating their own aircraft
which is still very costly for the small airline. Moreover, the foremost and primary perspective
behind the adoption of the strategically alliances is that an aviation company is benefits from the
large economies of scope which can be gain if they have the bigger network
A critical assessment of the benefits and challenges of the international strategic alliance selected
to the partners involved.
Many airline and other sector are utilising the many strategies in order to evaluate and
determine the creative manner for the business expansion and the development of the global
market in this is where the strategic business alliances has grown up with fast phase as this help
in the Oneworld and its partner for increasing its brand awareness and the capital without
utilising extra time and finance to gain competitive edge or advantage. In the viewpoint of
Kulikova and Dmitrieva (2021), it has been determined that strategic alliances are seeing as the
efficient response to the fundamental changes in the business operation of the various globalised
and liberalised air traffic market. This is because it has been critically analysed that this strategy
help the airline company to focus on the cost effective ways and expand the network and it is
making the entry into the international market more aspire despite the introduction of the Brexit
in the UK and EU nations. Moreover, through the strategical alliances company can offer the
supplementary services to its client like carrier services and also they leverage a great
opportunity to enter into new market with ease.
Even so, strategic alliances great benefits like the shared risk that can help the business
organisation to lower or control the risk this is because in strategical alliances the partner work
together with same distribution channel and therefore the risk are completely shared (Cui and Li,
2021). Nevertheless, Strategic alliances is important for the shared use of the bottleneck
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resources which is interesting sot slots on the airports and traffic right for market which are
banded by obstructive ASA. Even so, the global alliances also focused on the reciprocal access
to alliances partner lounges as kind of another advantage for the numerous expect vie traveller
that are having the property status. So through the airline alliances these group can now enjoy
numerous number of lounges. Another kind of much flaunted advantage of strategic alliances
adopted by the airline companies to adopt the concept of seamless travel this is because the
present focus of Oneworld is render traveller seamless travel experience. So, to achieve this
code-sharing is a method which the alliance partner used as customer oriented initiative.
However as per the dynamics of Antelo and Peón (2021), it has critically pointed out that
there are certain challenges associated with numerous benefits which a company cannot hinder in
their international business strategy formation. It has argued that the primary challenge which a
company faced is the selection of the partner this is because wrong selection of the partner can
wreak the company’s international market expand strategy. Moreover, it has been proposed that
the in every business alliances there is need of concrete objectives and aims so in case of absence
these aspects they would fall under the segment of failure and will quite on the early times.
Moreover, due to existence of alliances conflict, there are chances that the alliances which were
designed earlier can take face of the great rivalries against one another (Li and et. al., 2021). It
has been argued that in the alliances the partner would need to share some propriety information
with each other, but this access to data may be sign of big concern. This is in case the
information not shared at the time of contract of alliances and the situation apparent this will
impact on the relationship and trust, so there are also chances of the loss of autonomy and the
conflict over the distributing the earnings.
A suitable alternative market entry strategy in your recommendations
As per the perspective of Cui and Li (2021), it has been recommended that due to various
challenges in the strategic alliances where some companies quite on the early stage, there is time
to evaluate some alternative marketing strategy which can be used as the secondary market
expansion strategy of a business. However, there are various kinds of the market entry strategy
available for the company but when the company gone for the strategic alliances as the primary
strategy, the secondary strategy of the company would be launching of greenfield venture which
means establishing a wholly owned subsidiary company where the subsidiary concern airline
company enjoys the benefits of full control of the business. However if this strategy is not match
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with the market expansion goals then Oneworld can gone for the acquisition process in which it
acquire the some small carrier and provide seamless service to the passengers.
Analysis and discussion
From the above discussion it has been critically analysed that every business like airline
sector are trying the every aspect for the market development and expansion and the strategic
alliances and the collaboration strategy is growing one market entry strategy. Oneoworld is an
airline company that is result of the strategic alliances where they bring together nearly 14 world
class airline in order to offer a seamless transportation and the special licence for the frequent
flyers for a remarkable travel experience to the passengers (International Strategic Alliances,
2019).So from the above analysis of the literature it has been critically investigated that
Oneworld primary motivation behind adoption of the strategic alliances as their foreign market
expansion is to make it more reliable and smoothest as possible for the traveller for connecting
between each other’s flight and to develop a worldwide network route that would make the
global travel for the passenger more seamless or convent than ever before. Moreover, other than
this the primary motivation of Oneworld is to rise as the one of the best frequent flier
programme. Some other basic motivation of the strategic alliances mainly for the expansion of
the resources, scope and scale of network usage, expansion and diversion of the resources usage
and to share the risk with the partner while emerging as the first choice of the frequent flier in the
world.
Moreover, from the critical analysis of the literature it has been summarised that in the
international alliances there is need to select a good method for partner relations in order to foster
good relationship. This is because one of the primary reason behind the failure of the many
alliances is the incompatibility among the partners, so inter-partner fit is crucial aspect in
influencing the performance of alliances (Antelo and Peón, 2021). Even it has stated that right
partner selection can yield great importance in form of competitive advantage. Therefore,
oneworld develop a partner selection criteria which begins from the classification of the
performance as the main method and there measure in their initial model of the partner selection
process. Evaluation of the measures included defining the initial areas which is consist traveller
satisfaction and perception, their business process, organisational learning and the financial
measurement (Peek, 2021). In the next phase they measure the weightage and relative
importance based on the complementary resources and capabilities of the partner. After critically
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measurement of these capabilities there is need to conduct due diligence in order to evaluating
the fit. Then they move to the next phase which is the negotiation partnership agreement if the
partner gives the consent to the negotiation agreement then there is development of the alliances
plan by using the Fuzzy partner analysis pattern (Boniecki and Marciszewska, 2021).
Moreover, it has been critically analysed and discussed that the strategic alliances is
growing in the international business as this is strategy to accelerate international expansion via
the global alliances of Oneworld to be become the first choice frequent flier globally. The
Aviation Federation has proven to be a major contributor to the global health crisis. Between a
series of airports, tourist restrictions and landings, carriers have found it difficult to use certain
routes. Therefore, they always rely on partners to help bring passengers to their destinations. The
local selection of participating aircraft is to create a global network to allow as many passengers
as possible to reach their destination without leaving the services of the members involved,
which seems to have been intended in the relationship. The purpose of a cooperative is to "catch
passengers who can go elsewhere. Each of these agreements involves a number of aviation
operations; therefore, they can be called" broader trade unions "to distinguish them from many
smaller cooperative agreements.
It has been critically analysed that the strategic alliance of Oneworld is largely in
response to liberalization and globalization, the potential for fundamental changes in the business
environment of air traffic markets. They may arise with the goal of reducing costs, gaining easier
access to foreign markets, improving technological efficiency and reaping the benefits of
networking. However, as the number of real and potential competitors in the market decreases,
the likelihood of abuse of market power increases (Domínguez, Casanueva and Gallego, 2021).
The financial rationale behind strategic alliances of Oneworld is define as a system of voluntary
(temporary) agreements between firms, in particular, is to understand the economies of scale and
position, to save on transaction costs, to improve their competitiveness with other firms outside
the alliance and to be independent of risk sharing partners (Discuss the Motivation for
International Strategic Alliances, 2019). However, the connection to interconnected hub-and-
spoke systems represents the second stage in the evolution of hub-and-spoke systems after
relaxation. In addition, they enable cost reduction through combination. Through the use of
ground facilities, coordination of joint operations and flight schedules, joint collection of inputs
required for flight operations from toilet paper to aircraft, management of joint aircraft and
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implementation of improved practices for benchmarking and cost control of the Oneworld airline
alliances (Migdadi, 2021). As a result, the overall factor productivity of the participating carriers
is greatly improved and fewer resources are absorbed by air transport benefits.
Moreover, it has been critically analysed that the Like most research and development
connections in the manufacturing and other service industries, foreign connections are not about
creating new knowledge and product innovations, but about creating a larger network of less
connected markets. The competitive impact of this difference between SAT and GSA in other
sectors is likely to be exposed to future markets: innovative, exceptional, dynamic champion
competition is not even standard in the early stages of the production cycle. Is. Temporary
deviation from the equilibrium of competition; Patent protection is also not considered
necessary, at least for product progress. As a result, anti-competitive outcomes at first do not
always mean that it is a permanent monopoly.
Besides these there are some challenges which are being faced by the Oneworld in the
strategic alliances (ANNAÇ, 2020). It has argued that the main challenge facing the company is
partner choice because the wrong choice of partner will damage the company’s expansion
strategy in the international market. In addition, it is proposed that each business alliance should
have specific goals and objectives so that in the absence of these elements they are prone to
failure and only in the early stages. Furthermore, as there are coalition conflicts, alliances formed
in the past are likely to face great competition with each other. One of the other challenges facing
OneWorld is the security issue, as some major airlines have recently stated that they are involved
in serious security incidents related to their passenger booking systems. Several carriers are
reportedly investigating whether the photographers stole passenger lists and tours. Provide flight
information and sensitive passenger details between agencies and photographers
CONCLUSION
Thus, from the above carried out study it has been summarised that international strategic
alliances is a kind of international expansion strategy of the many organisation and in the
following report strategic alliances in the airline industry is discussed. This is because they are
using this strategy to provide frequent flier option to traveller to travel worldwide. Moreover, the
collaborative strategy is termed to be as the critical benefits of the company as they can share the
risk and the resources while operating in the same market segment. Moreover, the
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recommendation market expansion strategy which is wholly owned subsidiary company to
operate with the full control and liabilities.
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REFERENCES
Books and Journals
ANNAÇ GÖV, S., 2020. STRATEGIC ALLIANCES IN AIRLINE BUSINESS:
COMPARISON OF SKYTEAM, ONEWORLD, STAR ALLIANCE
GROUPS. Journal of Administrative Sciences/Yonetim Bilimleri Dergisi, 18(38).
Antelo, M. and Peón, D., 2021. The Size of Strategic Alliances and the Role Played by
Managers. Journal of Industry, Competition and Trade, 21(2), pp.287-313.
Boniecki, D. and Marciszewska, E., 2021. Non-Cooperative Game Theory in Measuring
Strategic Interactions between Airline Joint-Venture Alliances. European Research
Studies, 24(2), pp.152-164.
Button, K., 2020. Interactions of global competition, airlines strategic alliances and air traffic
safety. In Aviation Safety (pp. 525-544). CRC Press.
Chatterjee, S., Mukherjee, S. and Datta, B., 2021. Influence of prior reviews about a firm and its
alliance partners on reviewers' feedback: evidence from the airline industry. Journal of
Service Theory and Practice.
Cui, Q. and Li, X.Y., 2021. Which airline should undertake a large emission reduction allocation
proportion under the" carbon neutral growth from 2020" strategy? An empirical study
with 27 global airlines. Journal of Cleaner Production, 279, p.123745.
Domínguez-CC, M., Casanueva, C. and Gallego, A., 2021. Tourist destinations and cooperative
agreements between airlines. Journal of Destination Marketing & Management, 20,
p.100613.
Fu, Y.K., Huang, W. and Liao, C.N., 2020. The selection model for horizontal alliances between
hotels and airlines: An integrated application of NGT, Fuzzy TOPSIS and MCGP
methods. Tourism Review.
Kulikova, E. and Dmitrieva, E., 2021. Alliances are an Effective Way to Effectively Develop the
Transport Market. In Proceedings of the XIII International Scientific Conference on
Architecture and Construction 2020 (pp. 330-336). Springer, Singapore.
Li, Y., et. al., 2021. Impact of alliances and delay rate on airline performance. Managerial and
Decision Economics.
Migdadi, Y.K.A.A., 2021. The Impact of Airline Alliance Strategy on the Perceived Service
Quality: A Global Survey. Journal of Quality Assurance in Hospitality & Tourism,
pp.1-32.
Wang, C.H., and et. al., 2021. Frequency competition among airlines on coordinated airports
network. European Journal of Operational Research.
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International Strategic Alliances. [online] Available at:
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Peek, D., 2021. Evaluating and Selecting a Strategic Partner. [online] Entrepreneurship.org.
Available at: <https://www.entrepreneurship.org/articles/2006/12/evaluating-and-
selecting-a-strategic-partner>.
Ukdiss.com. 2021. Discuss the Motivation for International Strategic Alliances. [online]
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