Individual Academic Report on International Strategic Alliances

This individual academic report examines international strategic alliances, focusing on their role in foreign market expansion. It begins with an executive summary, followed by an introduction that sets the context for the study of the Sky Team airline alliance. The main body includes a literature review discussing the use of strategic alliances, motivations behind their formation, and the benefits and challenges associated with them. The report also explores alternative market entry strategies and concludes with recommendations for successful international business ventures. The report highlights the importance of strategic alliances in facilitating business growth, increasing revenue, and expanding into new markets. It also addresses the challenges managers face, emphasizing the need for careful market analysis and adaptation to local conditions. The report provides a comprehensive overview of international strategic alliances and their implications for businesses seeking global expansion.

Individual Academic Report

Table of contents
Executive summary.........................................................................................................................3
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Literature review..........................................................................................................................3
Motivations behind the formation of International strategic alliance..........................................7
Benefits and challenges of the international strategic alliance....................................................8
Alternative market entry strategy................................................................................................9
CONCLUSION..............................................................................................................................10
REFRENCES.................................................................................................................................11

Executive summary
Strategic alliance refers to an agreement between two organisations so that they can generate
more revenue and it will help in building good reputation in market. The main aim behind
strategic alliance is to make good quality products and provide better services to customers so
that their needs can be satisfied. It is important to make strategic alliance so that companies can
use technology of each other and less investment is required. In report, literature review is
discussed which includes use of strategic alliance in foreign market expansion and how it is
beneficial for growth of company. Strategic alliance helps in development of an organisation so
that more revenue can be generated and it will be beneficial for a company. Motive behind
formation of strategic alliance is described in report and how it is useful in making plans for
future growth of an organisation. Further, benefits and challenges of strategic alliance to partners
has been described. It includes problems or issues which is faced by managers while expansion
in international market. Recommendations are provided for better market entry in international
market so that more people can be attracted and goals can be achieved.

INTRODUCTION
The term international strategic alliance referred to as the arrangement that is
collaborative between the companies that are headquartered in different countries. The strategic
alliance is formed between the local companies and international companies. The report consist
of the airline alliance of the Sky Team that is initially formed by four carrier members and
expanded to have nineteen carrier members. The report consists of the critical review for the use
of international strategic alliance in the foreign market expansion. The report demonstrates the
motivation for the formation of the Sky Team. The benefits and challenges faced by the
international airline alliance are discussed critically. The modes of the market entry for the
airline alliance are discussed.
MAIN BODY
Literature review
Strategic alliance means agreement between two companies who want to come together so
that they can expand their business and generate more profit. It is important to make plans or
strategies for growth of company and it will help in expanding business in international market.
It is not easy for managers to manage all activities and there are different rules and regulations
which vary from country to country. It is responsibility of managers to identify market situation
and according to that plans should be made so that more revenue can be generated.
According to (Baum and Auerbach, 2017), expanding business in international market is
useful because it helps in increasing profit and builds good reputation in market. It is important
to expand business with help of international strategic alliance. When a company want to grow
its business in other countries then they take help of other companies in international market and
make contracts to work together. It will help in earning more revenue and they can attract more
customers. It is important for an organization to make plans or strategies so that better plans can
be made and they can get benefit of it. Expanding business is not easy because in different
countries it is difficult to sell products and attract customers. So, managers of company should
identify choice of people and a cording to that product should be made so that more customers
can be attracted. Strategic alliance helps both partners in expansion of business in international
market.
As per the view of (Chuang and et.al., 2018), many organizations use strategic alliance to
capture wide area and attract more customers. At a certain point of time managers want to

expand their business in other countries because they have built good image in existing country
and people are used to of their products. International partnership enables firm to access in global
market or international country, they also help in strengthening competition by making good
quality products and services so that needs of customers can be satisfied. When two partners
come together for a common purpose then they make better plans or strategies so that goals and
objectives will be accomplished. It will help in covering wide area and market needs should be
analysis to attract more people. Strategic alliance helps in determining situation of market,
according to those strategies are made. In this one company is situated in local market and other
organization is located in international market. They both come together and make strategic
alliance so that goals can be achieved.
There is different type of alliance which can be used by companies to expand their business
in international market and this will be beneficial for growth of company. Types of international
alliances are, multiple local alliance, multiple global, single local alliance and single global.
These are some types of alliances which can be formed by an organization so that they can
expand their business in other countries and provide products or services to many people so that
more revenue can be generated (Göv, 2020). Strategic alliance is being used by managers to
enter into international market and they want to sell their products in new market. This is a
strategy which is applied by most of the companies to earn more revenue and proper plans
should be made. Strategic alliances help in covering large geographical area and both companies
are working according to their capabilities. Successful managers adopt best practices such as,
alliance strategy formulation, execution and good management. These are some ways by which
organizations can gain success and it will be beneficial in achieving goals of company.
According to (Kyrylenko, Riazanovska and Novak, 2019), use of international strategic
alliance in foreign market expansion has negative impact. It is not easy to expand business in
international market because there are many challenges which companies have to face. There are
many issues while working in other country as in different countries working pattern vary,
lifestyle of people is different. When an organization want to expand their business in
international market then they have to make plans or strategies to identify needs of customers
and according to that product should be made. This will help in attracting more people and
company can earn more revenue. It is crucial for every company to make plans to do business in
international market but they have to face many problems. Managers have to firstly identify

market situation and choice of customers, so that they can enter easily in new market. The main
thing is to attract people by providing them good products or services at reasonable price. There
are many competitors in other country so managers have to identify strategy which is being used
by other organizations to attract people and make plans accordingly.
As per view of (Pratama and Halim, 2018), it is not necessary that strategic alliance will
work and partners can run business smoothly. Conflicts or misunderstanding can arise between
two partners or employees related to any topic so managers have to determine all factors and
after that they should make plans for strategic alliance. In international country customer
requirements are different, their lifestyle, language, culture, tradition and working style are all
different. So, it is not possible to expand business in other country because firms have limited
knowledge about marketing tools or techniques which can be applied for attracting people. There
will be local market competitors and it is the biggest challenge for a firm as they have to face
them. Entering into new market is not easy because there are many problems like difference in
culture, language, and lifestyle. If a new form enters into international market, then they have to
make rules and regulations according to that country. In all countries different policies and
procedures are applied because of difference in culture and tradition. Managers have to
determine market situation and on the basis of that they should make policies, procedures, rules
and regulations. Proper laws must be applied by managers for safety of workers and provide
healthy environment.
According to Vajdová, Szabo and Szabo Jr, 2018, the airline has its disadvantages with
the advantages in one side the airline alliance provide with the advantage of decreasing the price
of tickets when the airlines are linking the routes of the cities with each other, provide the
traveller with the range of choice for take-off that result in reduced travelling time and provide
the traveller with the improved standards of services including the ticket sales, baggage
procedures along with the provision of the necessary services. On the other side the airline
alliance serve with its own disadvantage also such as the airline may not respect the rules of
antitrust, this result in the exclusion of the companies from market that violates the standard for
the fair competition. The control of the key points, competitive as well as marketing power can
result in the collapsing of some countries that are competing as the low cost airlines. The airlines
are growing and are increasing the complexity within the partnership.

Motivations behind the formation of International strategic alliance
The third major alliance after Star Alliance and Oneworld is Sky Team. The number of
annual passenger in the Sky Team is 630 million in 2019. The number of member in the Sky
Team is nineteen from the five countries and operates the Airline with the slogan “caring more
about you”. Cargo alliance is also operated by the Sky Team and is named the Sky Team Cargo.
The Sky Team Cargo has ten carriers and they are from the Sky Team only. The Centralised
management team of the Sky Team is based in the World Trade Centre Schiphol Airport in the
Amsterdam Airport Schiphol in Haarlemmermeer, Netherlands. The airline alliance was formed
by the Delta Air Lines, Aeromexico, Air France as well as Korean Air. The Sky Team is able to
make 6402 flights on the daily basis and have 451 destinations along with 98 countries.
There are various motivations for the formation of airline alliance (Li and et.al, 2017). An
airline alliance can be explained as an arrangement in the aviation industry where two or more
airline agrees to cooperate at the substantial level. The alliance is able to provide the traveller
with the marketing branding to facilitate the inter-airline codeshare connection in the countries.
The branding consists of the unified airline liveries for the member aircraft. Sky Team alliance is
able to schedule the traffic in the revenue passenger miles of about 20.4 %. The alliance is able
to fly 630 million passengers that add to motivation for the formation.
In the early days the corporation within the aviation industry is less and they can only
operate and market their own routes as well as flights. The airline can concentrate on their own
brands, service offerings and routes and that allows the airline to serve only too few destinations.
For going on longer destination the travellers have to deal with many airlines. This motivated the
airline alliance for the formation; by making an alliance together the airline can take the traveller
to the destinations that are longer without dealing many airline services but only one. The
airlines can share the routes as well as sell the flights operated by the members of the alliance.
Formation of the alliance helps in getting more services in the time of the time where the
competition is growing significantly. The airlines are able to market additional routes that are not
even their own as well as they do not have to operate in all the routes by themselves.
The alliance helps the airline to make the processes simpler such as the ticketing and
baggage handling (Haoxuan, 2019). The formation of alliance helps the airlines to expand
internationally and that provide more benefits. There is a code-sharing between the carrier

members of the alliance on the transatlantic flights. The agreement allows the airlines to have
unrestricted landing rights along with reciprocal frequent-flier benefits for the travellers.
Benefits and challenges of the international strategic alliance
The benefits of the international strategic alliance are:
The airline alliance provides the carrier members with the benefit of not flying to the particular
routes. They are also provided with the benefit of marketing the customer with the extended
networks through the alliance without even travelling. The airlines are able to share the best
practices in them with the other airlines such as the IT systems and other services. The airline
alliance members are provided with the benefits like consolidation of the costs, co-location at the
airport as well as joint purchasing (Yea and et.al, 2018). The co-location for the Sky Team is
lounge and the joint check-in at London Heathrow T4.
The airlines are able to provide their customers with the following benefits with the
alliance that are:
Priority reservation as well as the convenient international booking is provided by the
airline members for their customers. The convenience for the international flight booking allows
flexibility to the flights. The customers can be provided with the cheaper flight tickets and the
short flight hours to reach the destination. The travellers with frequent flyer status are recognised
by the airlines and the travellers are rewarded as well as privileges with any of the airlines in the
alliance. The customers can be rewarded with the option of preferred seating, priority boarding,
priority check-in counters, extra baggage allowance, priority baggage drop-off, guaranteed
reservation on the sold-out flights, airport lounge access, priority security lanes, priority
immigration lanes, sky priority recognition and priority transfer desks. The travellers are
provided with the access to the lounges according to the airline fair.
Challenges to the airline alliance are:
The decrease in the operational cost and the ticket prices can increase the price for the
airlines in the alliance. This can be understood by the example such as there is a route between
two airlines and the two airlines are in the same airline alliance thus the competition will be
dissolved and the monopoly will be gained between the airlines. The other competitors do not
provide a direct flight to the same destinations as by the airline alliance. This will make the
traveller to go for the Sky Team alliance as there are no other airlines. The airline can get greedy

and spike the prices high for the tickets. This will make the airline alliance an unregulated
company.
Some airline might not get the landing rights in the international countries and this can create
problem for the alliance member. The airline alliances are growing dependence on the
technology for improving the operations. Efficiency and performances and the airlines industry
is exposed to the security risk along with the cyber-criminality (Ferreira, Mueller and Papa,
2018). The tragic events in the airlines of the alliance are accessed unlawfully by operating
systems and the cybercriminals are showing interest in the exploitation of the news. The
important flight information along with the sensitive details of the passengers is being handed
between the photographers and the agencies.
The airline alliance can develop a joint mitigation strategy to overcome such
criminalities.
Alternative market entry strategy
There are five modes for the market entry in an international market that are: exporting,
licensing, partnering, acquisition, and Greenfield venturing.
The exporting mode has the advantage of fast entry and low risk to it. The disadvantage
to the mode is it has low control, negative impact on the environmental for the travelling of the
passengers and low local knowledge. The licensing and franchising mode of entry have the
advantage of fast entry, low risk along with low cost. The disadvantage of this mode is it has less
control, the legal as well as regulatory environment must be strong and license can be a
competitor. The partnership and strategic alliance has the benefit of shared costs that reduce the
investment needed, it is seen as the local entity and have reduced risks associated (Guo, Yu and
Gimeno, 2017). The disadvantages attached to it are licensing or franchising, higher cost,
integration problems due to the different corporate culture. The acquisition mode of entry has the
advantage such as fast entry in the market, already known and has established operations. The
disadvantages of the mode are issues with the integration at home office and high cost. The
Greenfield venture mode of entry has the benefit of gaining knowledge of the local market, have
maximum control and seen as the insider who is providing jobs for the locals.
The recommended option for the entry in the market will be the following strategies for
the airline alliance:
Exporting

The home country of the airline alliance can sale the services to the international
country’s market. This will help the aviation alliance to eliminate the cost and expenses for
settling in the foreign country but can still work there. The alliance has to promote and market
their services in the foreign market that is already done by the local airline that is the member of
the alliance and hence can easily contribute to the promotion of the Sky Team alliance (Raturi
and Verma, 2019). The alliance need to let the traveller know about the deals of the ticket and
the services they provide to them such as the pricing and the rewards of the frequent traveller,
this can be done by advertising, local sales flow or the trade show.
Partnership
Another strategic way to enter the new market is by strategic alliance with the local airlines.
This will involve the contractual agreement with the local airline and Sky Team that includes
that the airline will cooperate with alliance way for the given time to achieve the common goal
of the alliance. The advantage of partnership with the local airlines in the Sky Team is that the
local airline understands the culture, ways to do things as well as market. The partnership will be
very useful for the Sky Team if the local airline have existing reputation in the country along
with the existing relationship with the customers.
CONCLUSION
It can be concluded from the report that the use of the international strategic alliance in
foreign market expansion can be successful if the advantages and the disadvantages are
considered before the formation of the alliance. The motivation for the formation of the
formation of the airline alliance is the low cost of operation and greater routes for the customers.
The benefits for the carrier members of the alliance are that they can provide their customers
with more destinations that they do not even have to travel and are able to provide the customers
with cheap tickets and better standards for travelling. The airlines also face the challenge to
corporate with the partners when one airline is not provided with the right to land in specific
countries. The alternative modes of entry can be introduced to the existing airline alliance for the
entry in the market.

REFRENCES
Books and Journals
Baum, H. and Auerbach, S., 2017. Strategic management in the aviation industry. Taylor &
Francis.
Chuang, Y. T., and et.al., 2018. Multimarket contact, strategic alliances, and firm
performance. Journal of Management. 44(4). pp.1551-1572.
Ferreira, Mueller and Papa, 2018. Strategic knowledge management: theory, practice and future
challenges. Journal of Knowledge Management.
Göv, S. A., 2020. Strategic Alliances in Airline Business: Comparision of Skyteam, Oneworld,
Star Alliance Groups. Yönetim Bilimleri Dergisi. 18(38). pp.815-837.
Guo, Yu and Gimeno, 2017. Language and competition: Communication vagueness,
interpretation difficulties, and market entry. Academy of Management Journal. 60(6).
pp.2073-2098.
Haoxuan, 2019. Strategic alliance in civil aviation industry: a case study of China Southern
Airlines withdraw Sky Team Alliance (Doctoral dissertation).
Kyrylenko, O., Riazanovska, V. and Novak, V., 2019. Strategic airline alliances as a special
form of company integration. Baltic Journal of Economic Studies. 5(1). pp.75-80.
Li and et.al, 2017. Entrepreneurial orientation and strategic alliance success: The contingency
role of relational factors. Journal of Business Research. 72. pp.46-56.
Pratama, A. and Halim, R. E., 2018. Brand loyalty and the moderating role of involvement: a
strategic alliance perspective in indonesia airline industry. Jurnal Manajemen. 22(1).
pp.1-13.
Raturi and Verma, 2019. Competition between High Speed Rail and Conventional Transport
Modes: Market Entry Game Analysis on Indian Corridors. Networks and Spatial
Economics. 19(3). pp.763-790.
Vajdová, Szabo and Szabo Jr, 2018, December. Economic aspects decisive about entry into the
global alliance. In Production Management and Business Development: Proceedings of
the 6th Annual International Scientific Conference on Marketing Management, Trade,
Financial and Social Aspects of Business (MTS 2018), May 17-19, 2018, Košice, Slovak
Republic and Uzhhorod, Ukraine (p. 243). CRC Press.
Yea and et.al, 2018. The sharing of benefits from a logistics alliance based on a hub-spoke
network: a cooperative game theoretic approach. Sustainability. 10(6). p.1855.