International Business Report: Airline Industry Drivers and Strategies

This report provides an in-depth analysis of the international business environment, specifically within the UK airline sector. It begins with an introduction to international business and the impact of globalization, discussing various technological, political, market, cost, and competitive drivers. The report then delves into the implications of globalization on the airline industry, including the effects of open skies policies, strategic alliances, and the changing demands of the international labor market. A PESTLE analysis is conducted to examine the political, economic, social, technological, legal, and environmental factors influencing the industry. Furthermore, the report explores geographical expansion strategies such as franchising. The content also discusses international trade theories and their impact on the airline industry. The report examines the challenges and opportunities in the globalized airline market, including the need for airlines to adapt to changing consumer behaviors and economic conditions. The report's structure includes an introduction, a task section, a conclusion, and references, offering a comprehensive overview of the airline industry's international business aspects.

International business

TABLE OF CONTENTS
Introduction......................................................................................................................................3
TASK 1 ...........................................................................................................................................3
1....................................................................................................................................................3
2. ..................................................................................................................................................5
Conclusion .....................................................................................................................................6
References........................................................................................................................................7

INTRODUCTION
International business can be defined as the process in which companies start selling their
products and sevices beyond the domestic territory of a nation.Many large and small companies
are affected by the global actions and competition. Present report is based on the airline sector of
UK. This report covers various business tools which are being used by the organizations in
industry. Along with this, discussion regarding two suitable strategies that individual airline can
use for entering into a new market is also carried out in this report.
TASK 1
1.
There are different drivers of globalization which affect the activities and operations of
businesses. Some of them are mentioned as below:
 Technological drivers: The us of advanced and upgraded technology can help
companies to deliver more accurate and satisfactory products. In airline industry,
technological developments are mainly carried out within commercial jet aircraft.
Furthermore, telecommunication also enables businesses to carry out effective computing
and communication at low cost. Internet is the most useful technological driver which has
resulted in the development of global e-business. the use of high end technology can help
companies in carrying out smooth flow of operations and activities (Ball, Geringer,
Minor and McNett, 2012). For exporting the products from one country to another,
international airlines are providing great transport facility. Moreover, digital technologies
have opened the way towards global network. It is a way through which information and
knowledge can be shared. Internet and e-commerce has developed as one of the biggest
and most potential platform for marketing and promotion of companies product and
services. Through advanced technology, customers can book their airline tickets and also,
cancel it through online facility. Communication technology changes the way of life of
people all over the world. Worldwide web enables people to access the information of
anything from anywhere. Through internet, people are connected with each other through
emails, video calls, etc. With the development of advanced technology, transport has
started to play a important role in globalization. Airline transport enables the expansion
of tourism and trade across country. The airline travel has become affordable now for the
all consumers (Wild, Wild, and Han, 2014). It removes the economic boundaries between

countries. Free trade encourages free flow of products, services and people within
nations.
 Political drivers: Deregulated market and liberalized trading rules decrease the tariff and
allow foreign direct investment through all over the world (Johanson and Mattsson,
2015). There are many examples of the latest developments such as privatization in
Europe and world trade organization, etc.
 Market drivers: Changing need and demand of people in the market is another major
driver which affects the airline industry. Opportunities for the growth in domestic market
are limited to every business. Therefore, global expansion can be used by businesses to
overcome from this problem (Khanna and Palepu, 2013). The use of global marketing
channels helps in determining the changing need and demand of people in the market
and then deliver effective services according to the same.
 Cost drivers: At the time of carrying out global operations, it is required by companies to
evaluate and take care of overall operational cost. The opportunity to build global scale
economies is another cost driver of globalization (Waldman and Jensen, 2013). The high
cost incurred in product development is another important driver of globalization.
 Competitive drivers: The global market has resulted in making competition highly
intense between organizations at international level (Hirst, Thompson and Bromley,
2015). The support of this driver has strong interdependency among different countries.
The international trade theory
It refers to the exchange of goods and services between countries and various business
entities. There are various types of products that are sold by country in international market and
it is known as export market. Globalization describes trade pattern occur at differ periods of time
(Stromquist and Monkman, 2014). of at the initial stage globalization is getting dominated by
global expansion. The next stage consists of rise of multinational companies which resulted in
global development through trade. The last stage is the one in which globalization isdriven by
technological growth and development driven. International trade theory is divided into two
categories, that is, classical based and firm based. Classical theory included comparative and
absolute advantage. On the other hand, modern firm based theory includes factors such as
proportions trade and global strategic rivalry.

International trade theory shows the pattern of trade between countries and volume of
trading among goods. This theory also mentions the losses and gains that arrive from trade. as
per the free trade theory businesses and counties should be allowed to carry out free movement
of products and services within the country (Baylis Smith and Owens, 2013). However,
protectionism argues that market should be regulated to make sure that its efficiencies are not
benefiting only to trade countries but others as well. This theory has an advantage over other
country which produces goods and services at low cost because they have cheap skilled labor
and fertile land. Thus, they are able to sell products at cheaper price as compared to other
country. However, this theory does not justify all aspects of international business. The theory of
comparative advantage shows that if country cannot produce a product more efficiently then it
can seek for producing those goods in which it is specialized.
Impact of globalization on airline
The modern air transport industry is expanding within a liberal market. Airlines are
sometimes deregulated and are indludege in carrying out price discrimination. They always try to
charge different fares to gain higher revenue from customers (Czinkota and Ronkainen, 2013).
They offer lower fare only when situations where competition gets highly intense Problem faced
by airline is to stay in competitive market. For this purpose, they need to set fixed cost and take-
off time for each destination. Various problems occurred when there is new entry of firms in the
market. Globalization also leads to increase in the overall economic activity. Airlines change the
way to fight with challenges for meeting new demand required by international labor market.
They started low fare services to change the consumer perceptions.
The open skies policies have resulted in formulation of strategic alliances and it affects
the demand and supply curve of international air travel.. It is now large and takes 1% of GDP of
EU and US and distributed in many industries such as exotics and tourism (Folsom, Gordon and
Van Alstine, 2012). The world’s major airport has been developed to interface between the land
and air transport and it can also handle milliond of international passengers. International trade
also increases the global income that results in more tourists who travel internationally and free
movement of products Globalization leads to higher demand for the movement of goods and
people from one country to another. Hence, it can be said that globalization entails mobility
which helps in increasing the migration permanent or temporary. To cover a long distance,
international air transport is the cheapest way for traveling.

PESTLE Analysis of airline industry
Political factors
There are many political factors which affect the airlines. It is adversely affected by
increased security measures after the incident of 9/11, it is also important. Making new airports
and expanding the existing one is a major initiative which has been take by government to
promote growth and development of airline industry. The airline industry operates in a political
environment. The passenger’s safety is important; therefore, in order to carry out smooth flow of
operations, stable political environment is required.
Economic factors
The global airline industry has not been recovered after the 9/11 attacks and it is highly
dependent on the economic situations prevailing in the country. Due to economic instability of
low cost airline such as EasyJet and Ryan air etc. have started facing issues in their sales and
profits. Cost of operations has also increased because of the rise in fuel prices. Many valuable
lessons can be learn from the recession which has occurred recently . This includes the way of
surviving in tough economic situation. Now, airline is earning high profit as currently, fuel price
is at the lowest point.
Social factors
Different types of people are traveling all over the world and they know different tourist
destinations through media. It results in the growing demand of holiday packages. it is required
by the airlines to make changes in its offering on the basis of changing customer need and
demand. At business class, number of passengers has decreased as now, there are improved
communication facilities which has reduced the need to fly for meeting purpose across country.
Technological factors
Technology has a huge impact on the airline industry. Use of internet makes it possible
for customers to book the tickets online. On the websites of airline companies, people get
information of about travel and airfare. This technology is used by airline industry to grab the
attention of large number of customers. Facilities like mobile phone communication and social
media makes it easy to connect airlines for interacting with customers.
Legal factors
There are many rules and regulations made for the safety and security of passengers. All
rules and regulations are compulsory to follow for all airlines traveling from that country. Rules

and regulations also create barriers for new airline industry to get operating license in some
country. There are many strict laws made and customer’s expectations are also increasing which
has become the biggest challenge for airlines.
Environmental factors
There are many issues related to environment that are increasing day by day. Weather
changes are increasing up to 15% for which air industry is responsible. There are many airlines
trying to bring environmental friendly airplanes in the market. The environmental organization
and air travelers authorities are continusly monitoring the way in which airline is dealing with
all issues related to environment.
2.
Geographical expansion considered through franchise systems in which companies
expand in new markets with the help of strategies such as franchising (Johanson and Mattsson,
2015). Therefore, at the time of entering in a new market and expanding business, it lead to
certain amount of risk for the united airlines.
There are four marketing strategies for lowering the risk which are as follows:
 Marketing areas can be developed by opening high number of stores
 Helping new franchisees by developing an opening launch programAttaining higher sales
level yearly local store marketing plan should be developed and applied immediately
following the opening launch program
Develop an opening launch program stage may be critical for entering in a new market.
But, developing an opening program is helpful in supporting the franchisee to achieve break-
even at a faster rate. After entering into a new market, it is important to build awareness of the
brand. A plan is required to be developed that is tailored for each new franchisee in a particular
market area. businesses aee required to make sure that they are offering products and services
as per changing customers needs in order to sustain in highly competitive marketplace. (Ball,
Geringer, Minor and McNett, 2012.). At the time when franchisee is successfully launched then
sales increases for a period of time. To continue the sales growth, proper planning and execution
should be managed by a marketing firm. In plan, there are some factors which should be
addressed such as sales goal, promotional campaigns, advertising strategies, etc.
Franchisers choose the traditional practice of selling unit in terms franchisee for growing
business in a particular market. Earning profit may become difficult for single isolated

franchisee. For United airlines, franchise growth strategy should be evaluated carefully by
keeping in mind the current economic environment (Czinkota and Ronkainen, 2013). Possibly
with the better economicsituations these strategies will support in providing more benefits . For
the long term success, these strategies must be noticed earlier. Hence, airlines can become
successful through franchising because it is a long term partnership.
Joint Venture Strategy
Joint venture is a cooperative enterprise which enters into two or more business entities
for expanding the business. Joint venture has improved the Canada airline. The external factors
like oil price, governmental policies, etc. may affect the success of these airlines. To become risk
free from the external factors, Singapore airline is required to do partnership and alliances that
allow them to operate efficiently in the entire industry. Through joint venture, airlines can offer
services and share profits, risks and revenues. These joint ventures become a key factor in the
rapid growth of airline industry. There are many factors that lead to the growth of airline JVs
worldwide. In this, two or more airlines share their resources and split revenue. Here, one
problem faced by the airline is increasing presence of low cost carriers. It mainly offers fare at
lowest price. This forces Canada airline to cut its airfare price for remaining in the competitive
market. A feature of joint venture is that resources are being shared which increases the
effectiveness of organization (Hirst, Thompson and Bromley, 2015).
According to this concept means that revenue received by each member off joint venture
is dependent on the air carrier. The open skies agreement is signed between Government of
United States and European union for its development. It made it possible for European airlines
to fly on any city of U.S. Various joint networks can be formed across the north Atlantic such as
Lufthansa, Air Canada, etc. It allows four airlines and promote 250 flights with 500 connections
destinations. The growth of joint venture is especially great. It allows airlines to operate in the
international network. Through joint venture growth the organization is able to operate more
effectively. It makes Canada airline to operate effectually for international trade. Through joint
venture, airline is now able to spread out departures at the same time as compared to what its
competitors are offering. By entering into a new market, customers are offering new services and
lower airfare. It includes shorter time as many better connections are available.
Merger and acquisitionIt is a process through which two companies are integrated into one.
Level of competition has increased in the market and for this purpose, merger and acquisition are

important to deal with the competition. Acquisition offers channel to cut the cost and pressure on
companies. It is tough to engage in the competition and through strageies such as ,erge Company
can easily expands its business all over the world. The business operating in airline industry can
merge with other companies in order to deal with intense competition and increase their profits.
It reduces the cost of operations and helps in operating effectively.
CONCLUSION
From the above report, it can be concluded that there are many drivers of globalization
such as technological, political, etc. which leads to the expansion of airline network.
International trade theory also helps in exporting and importing the products from one country to
another. Further, it can be concluded that there are many strategies for entering into a new
market. Airline firms use joint venture and franchisee strategies which are effective for entering
into the new market for expanding scope of its business.

REFERENCES
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