International Business: Virgin Atlantic Strategic Alliance Report

This report provides a comprehensive analysis of international business strategies, focusing on market entry and strategic alliances within the airline industry. The report begins with an executive summary and introduction, setting the stage for a literature review that explores the use of international strategic alliances, particularly the joint venture between Virgin Atlantic and Delta Airlines. It examines the motivations behind this alliance, including risk reduction, market access, and competitive advantages. The report delves into the benefits and challenges of such alliances, such as achieving goals, market reach, and potential conflicts. Furthermore, it explores alternative market entry strategies for international expansion. The analysis and discussion section provides a deeper understanding of the strategic decisions made by Virgin Atlantic, followed by a conclusion summarizing the key findings and implications of the research. The report highlights the importance of understanding international business dynamics and making informed strategic decisions for successful global expansion. The document is contributed by a student to be published on the website Desklib. Desklib is a platform which provides all the necessary AI based study tools for students.

International business

Table of content
Executive summary..........................................................................................................................2
INTRODUCTION...........................................................................................................................3
Literature Review.............................................................................................................................4
Analyse the use of international strategic alliance in foreign market expansion......................4
Understanding of the motivation behind the formation of the selected strategic alliance........5
The benefits and challenges of the international strategic alliance selected to the partners
involved.....................................................................................................................................6
Alternative market entry strategy to enter foreign market........................................................7
ANALYSIS AND DISCUSSION...................................................................................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................11

Executive summary
International business refers to dealings or exchanging of commodities and services from one
country to another country in order to capture international market and to make sure to attract
potential customers which can help the company in increasing their sales as well as profitability.
In order to capture the international market effectively and efficiently the company need to make
strategies regarding their market entry as it is a very crucial step towards international business.
It is important for the company to analyse the benefits and challenges of market entry before
entering into the market in order to get an idea about the situation that may arise while do in
international business and the company needs to be ready for all those situations so that they do
not face the losses or can take the right decision about the company. After entering the market it
is not guaranteed that the product will become a success immediately so the company needs to
patiently handle every situation. It is important for the company to make slight changes
according to the taste and preferences of the audience of foreign market in order to attract more
customers.

INTRODUCTION
International business refers to a situation where the production or distribution of product and
services crosses country’s border. It refers to the trade of services, products, technology, capital
or knowledge across national borders. Globalization refers to the trade or transaction of goods or
services cross border between two or more countries, it means its an international business (Birru
and et. al., 2019.). In context to Virgin Atlantic also known as Virgin Atlantic airways limited is
an airline company founded in the year 1984. It is an airline headquartered in Crawley, England.
The company has primary operational bases at Manchester, London Heathrow.Virgin Atlantic
uses a fleet mixed up of airbus and Boeing wide body aircraft. The company serves at the
destinations in North America, the Caribbean, Middle East , Asia and Africa. The main base of
the airlines are the base at Heathrow whereas the base at Manchester is a secondary base. The
airline divided their aircraft in three cabins namely Economy class, Premium class, upper class.
Further the report will provide a better understanding about strategic alliance and expansion
within foreign market explaining about the market entry strategies and by taking into
consideration challenges and benefits.
Literature Review
Analyse the use of international strategic alliance in foreign market expansion.
According to Samantha Shankman, (2012), international strategic alliance refers to the joint
hands in between two or more companies that creates a joint venture. They will share their
resources as well as their risks and will move towards the accomplishment of the same goals and
objectives (Chappell, D.S. and Schermerhorn, J.R., 2021.). The alliances in between the
companies helps them to take competitors advantage and will also helps them in entering the
market effectively and efficiently with the help of market entry strategies. Virgin Atlantic
airlines set to have joint venture or alliance with Delta air lines. The effective business strategy
and alliance of the airlines helped Virgin Atlantic to enter global market and expand their
business internationally. The importance of alliances between the companies are given below in
reference to Virgin Airlines:
Access to different markets: By making strategic alliances both the companies will have
an advantage of reaching to a new market which will not only increases the market share of the
company but will also help the company to attract new customers. When a company enters into

new market they will have an easy entry and they will have the opportunity to use the resources
of other company which is already in the market. Virgin Airlines also formed alliances with
Delta air lines in order to expand their business and to enter new market.
Risk reduction: By making a strategic alliance the company will share the risk and
losses together. In this way the losses gets distributed and the company have to ear only the part
that is agreed by them. The other part of the loss will be bear by other company (García-Lillo
and et. al., 2019.). As both the companies are sharing resources and profits together then they
need to face losses together as well. In context to virgin airlines, if the company suffers losses at
any point of time then Delta airlines also needed to share that losses.
Stronger strategic objectives: When joint venture takes place in between two or more
companies then it will double the amount of success as the company can take benefit of the
resources and can also take competitors advantage in the market. These advantages will make the
company more powerful in the industry and will help the company to achieve their objectives. In
respect to Virgin Airlines, the company can move towards their goals more faster as they have
the support of Delta Airlines and it is beneficial for both the companies.
Understanding of the motivation behind the formation of the selected strategic alliance.
According to Andrew Parker (2012), the strategic alliance between Virgin Airlines and Delta
Airlines will put pressure on British Airways as they can become a competition in the market for
British Airlines (Hamel, G. and Prahalad, C.K., 2017.). The main motive of companies to make
strategic alliance is to capture the market and to have competitors advantage. This alliance will
prove to be a tough competition for others in the industry as the resources of both the companies
are combined now.some of the motivations for the alliance between airlines are given below:
Reduces financial risks: the strategic alliance will reduce the financial risk for both the
companies the the losses will be faced by both companies together and the burden of financial
resources will not be on only one shoulder and both the companies will make sure that
appropriate financial resources are available. In context to Virgin Airlines, if they face losses or
financial difficulty the Delta airlines will also share the same problem and will contribute for the
betterment of the alliance.
Easy entrance into new market: It is not very easy for companies to enter into new market.
Their are lots of companies who were successful I their market but fails to impress foreign
people. It is important for the company to do proper research before entering into the market and

the other company can surely help in this process as they already know the taste and preferences
of the market. In reference to Virgin Airline, they enter the market in which Delta was already
successful which makes it much more easier process for Virgin Airlines because of their strategic
alliance.
Competitive advantage: The companies forming joint venture will always get competitors
advantage as the companies will share their resources which is beneficial and will make them
more powerful in front of their competitors (Hartmann, M., 2017.). The strategic alliance gives
the opportunity to companies to take higher risks as they can share the profits as well as losses
and the more risk they take the more market they will capture. In context to Virgin Airlines, they
are already the biggest competitor of British airlines after this joint venture.
Economies of scale: In order to make sure that the scarce esources are being used at the place
and time where they can give maximum return is very important for businesses. The companies
must make sure that no scarce resources get wasted and they are utilizing those scarce resources
in the best way possible. The companies tries to find big companies for joint venture as they have
wider market share and also they will get to share more resources as well. In respect to Virgin
Airlines, they also tried to join their hands with big companies so that they can become more
powerful.
The benefits and challenges of the international strategic alliance selected to the partners
involved.
Helpful in achievement of goals: Strategic alliance between two companies help them in
achieving their goals effectively and efficiently. It is the power of the joint venture that helps the
company to achieve whatever they want with the help of combined resources as well as
combined sharing of losses. In context to Virgin Airlines, the company will be able to become
the best airlines in UK as Delta airlines are in strategic alliance with them and they are having
resources which can be beneficial for the company.
Wider reach to new market: When a company comes into strategic alliance with
another company they get help in entering the new market. Entering new market is not an easy
task but with the help of strategic alliance the company can use the opportunity to increase its
market share and make sure that they are in the right direction (Iyer, G.R., 2021.). In reference to
Virgin Airlines, they entered the market where Delta was already available and they know the

problems as well as the opportunities of the market because of the experience of Delta which
makes it easier for Virgin Airlines to enter the market.
Affordable alternative of acquisition or merger: Acquisition as well as merger are an
expensive option in front of strategic alliance. Also the company gets the opportunity to take
advantage of the experience of the company. While entering the mew market one of the most
important thing is the experience and the knowledge about the market. In context to Virgin
Airlines, they were not interested in using their fund to acquire any new company so they opt for
affordable alternative.
Challenges involved in strategic alliance
Choosing the right partner: It is important for both the company to make sure that the
company they are choosing has the same goal as of the other company. If their is a conflict in the
objectives of the company then this alliance is not going to last long. Strategic alliance involves
cost which can be a full loss if the other company is not what they expected.in context to Virgin
Airlines, they make sure that their are no confusion about the goals and objectives of each other
so that they do not involve in any conflict later on (Killing, J.P., 2017.).
Knowing when to reassess alliance: In order to make sure that the goals of the alliance
is meeting the expectations or not. In order to do o the company needs to do reassessment of
alliance from time to time so that any misunderstanding or misconduct can be determined and
solved if possible. It is required from both the companies to keep a close eye on the workings of
one another so that any misunderstanding can be avoided. In reference to Virgin Airlines, they
make sure that the alliance is reassessed from time to time.
Upholding trust and honesty: When a company agrees to strategic alliance they put
their trust into the other company. Without trust and honesty no partnership can last long so it is
important for both the companies to trust each other and make sure that they work honestly. In
reference to Virgin Airlines, they build the foundation of their partnership on the basis of trust
and honesty and expect the same from the other party as well.
Alternative market entry strategy to enter foreign market.
According to Thomas Brownlees (2021), it is necessary for companies to choose market outside
national boundaries as and when the company grows and gain competitiveness. Right choice
market entry strategy is extremely important for organizations that are thinking about expansion
as the fulfillment of company’s goal and objective totally depends upon that. There are several

ways through which Virgin Airlines can enter new market and achieve the success and expansion
that they wanted. Some of the ways of market entry are given below:
Licensing: In this method the licensor gives licensee the right to produce a product or
service in order to capture international market (Mäkelä, L. and Kinnunen, U., 2018.). The
licensor in return to permission recieves some payment from the licensee as royalty. The product
that is produced by the licensee will be under company’s IP or patent. There can be two types of
format for licensing such as standalone and licensing plus.
Standalone: In this type of licensing the contract work will be done on legal basis and the
licensor will receive royalty in return to the rights. The licensee will be liable to pay royalties to
licensor.
Licensing plus: The licensing contract foresees clauses regarding R&D and has a relationship
orientation.
Franchising: in this case the franchiser gives their right of using its products and services
to franchisee which can use the brand in exchange of payment. The franchisee can open the
business or shop under the name of the original brand and can sell the products and services of
the brand in the location of their own. It helps the franchiser to spread brand awareness and also
in capturing bigger market share. In this way the brand can attract more customers and can make
a loyal customer base which is essential for every company.franchisee agreement are on the basis
of time so when the time is over the agreement are needed to be renewed (Matheson, R. and
Sutcliffe, M., 2017). The franchisee package generally includes copyright and intellectual
property, trade secret, patent, design, geographic exclusivity, know-how, store design, market
research for the area, trademark name, location selection.
Joint Venture: Joint venture is a strategic alliance between two or more companies in
order to get competitive advantage in the industry. It is an affordable option for those companies
who do not want to invest huge amount in merger or acquisition. Joint venture enables both the
companies to combine their resources as well as risks. One company can use the resources of
other when in need and the losses that may appear will also be shared by both the companies
which makes it a good option. There are two traditional forms of joint venture where in one form
a new entity is created in partnership and the other form in which the venture is based on
contractual relationship or can also be called as non-equity joint venture.

From the above mentioned option it is suggested to Virgin Airlines to opt the joint venture option
as it will help them in achieving their goals and objectives. It will not only set up a good image
of the company in foreign market but will also help in increasing the sales and the revenues of
the company.
ANALYSIS AND DISCUSSION
From the above literature review on Virgin Airlines in regards to use of strategic alliance,
motivation behind strategic alliance, benefits and challenges of strategic alliance and the best
option to enter foreign market, a detailed analysis and discussion is as follows:
Use of international alliance in foreign market expansion
After getting success in local market and attaining economies of scale, expansion and alliance is
not a choice anymore now it is a necessity for Virgin Airlines to expand and try to capture new
market which not only increase their brand value but will also make sure that company earn
more profits. International alliances will provide a better entry in the new market to the company
that any other option of expansion(Prud’homme, D., 2019.). It is very important for companies to
understand that in order to grow and gain profit the company needs to expand and keeps on
entering new market so that they can attract the potential customers and make their company
profitable. On the other hand, strategic alliance also comes with some disadvantages as this
strategic alliance can do more harm then good to Virgin Airlines which not only ruin the
business in local market but can also make them loose their customer base. It can ruin the image
of the brand and the company might need to face some severe losses which are not good for any
company.
Motivation behind the strategic alliance for Virgin Airways
One of the major motivation behind the strategic alliance of Virgin Airways and Delta’s Airline
is to capture the new international market which can increase the customer base of the company
and will make it easier for the company to enter any new market. Another reason behind
strategic alliance is to make sure that the company is not only dependent on local market and has
other market segments as well (Rialp and et. al., 2019.). The company will be able to use the
resources of the other firms as well and will be able to make sure that they do not face any
problem because of that which means that they can work more effectively and efficiently
towards the goals and objectives of the company. Virgin Airlines are very well known airlines in

their local market and in order to expand their business they enter the new market with Delta
Airlines.
Benefits and challenges of international strategic alliances
Strategic alliances has been formed by the companies in order to expand their business in
international market by sharing the resources of the companies in which alliances are made. This
will make sure that both the companies are on the profit side and no one is suffering losses
because of that strategic alliance. It is difficult for a solo company to enter the market all by
themselves and in order to get support in affordable manner the company must try strategic
alliance that can make sure that the company can enter new market in easiest way possible. Their
are benefits that includes sharing of resources as well as losses. It also reduces the risk and losses
of the company because both the companies are sharing losses as agreed by them ( Sharma and
et. al., 2019.). Some of the challenges that are faced by the company in strategic alliance are
choosing the right partner for alliance because a wrong partner can ruin not only the reputation of
the company but will also lead the company towards huge losses.
Suitable alternative market entry strategies to enter into the foreign market
There are several market entry strategies in foriegn market that are descrbed above. In
regard of this, there are several strategies which can be used by Virgin Airlines in order to take
entry into the new market that include franchising and licensing which is the most appropriate
options to take entry in new market. In this the foreign market provide the trustworthy way to
enter in the new market and do operations of the business in order to achieve growth and
stability in the business environment. Meanwhile, it is considered as the less profitable approach
in order to get entry in the market as it includes high risk and the strategy that can damage the
brand image of company.
Besides from this, Virgin Airways can also consider joint venture which is the
partnership agreement among the Virgin Airways and the Delta airways in terms of sharing
losses and profits ownership and control of business venture ( Verbeke and et. al., 2017.). It is
considered as the best option to get entry in the new market because due to this companies share
their experience, competitor knowledge and connections in order to increase their customer base.

CONCLUSION
From the above report, it is concluded that international trade is exchanging of goods and
services from one country to another. International trade can be a good opportunities for
company’s as they will be able to capture market at a global level and will also be able to attract
potential market which will enhance the profitability as well as the brand image of the company.
The company needs to make their product unique and must do slight changes in order to
compliment the trend of foreign market and must also develop a proper plan before entering
foreign market in order to achieve growth and success in the market. In terms of this, the
company must follow a proper market entry strategy so that they can achieve their goals and
objectives. The company needs to take a closer look at the drawbacks and benefits of the market
entry strategy and it is very important for the company to get competitors advantage so that they
can survive in the foreign market. In regards to this the company must take competitive market
forces into consideration and also should examine the external environment of the company with
the help of frameworks and models.

REFERENCES
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