Lysi irlins - Identifying Global Business Opportunities, Analyzing International Competitors - Research Paper Example

Glоbаl Businеss Рlаn Рrоjесt of Маlаysiа Аirlinеs Student Name Institutional Affiliation Glоbаl Businеss Рlаn Рrоjесt of Маlаysiа Аirlinеs Phase 1 – Planning the Global Business Enterprise MODULE 1 – Identifying global business opportunities Since the Маlаysiа Аirlinеs commenced its operations in 1972 it has firmly established itself, most particularly in the Asian market. It now has its operations in East Asia, Southeast Asia, Middle East, Australasia, as well as on the Kangaroo route. Furthermore, the airline has got two main hubs, which include Kuala Lumpur International Airport and Kinabalu Kota International Airport. More importantly, the airline has been very successful in continuing non-stop international flights across various destinations across the world. In addition, Маlаysiа Аirlinеs has a strong brand and financial stability. However, the airline is faced with a great threat of the increasing competition in the industry, particularly within the Asian market. This poses a great problem in regard to the long term sustainability of the company for the increase of competition, as a result of new entrants, will adversely affect the company’s market share and profitability in the long run. Nonetheless, this does not mean that the company is at the losing end, owing to the fact that there are various market opportunities at its disposal, which, if exploited, can make a turn around for the company. One of the business opportunities that the company can exploit regards investing and expanding its destinations to reach the emerging markets, particularly in the African countries. Most specifically, Маlаysiа Аirlinеs should consider expanding to the East African market. East Africa comprises of Kenya, Uganda, Tanzania, and Rwanda. This region is undergoing a robust economic growth, and the airline industry in the region is yet to mature, but the market size of the industry is increasing rapidly in the recent years. Kenya in particular, offers great market opportunities for the company in the region since its economy is the largest by GDP in the region (in the east and central Africa). In addition, the East African market is increasingly attracting many foreign investors from Asia, and is a renowned tourist destination, visited by many tourists from across the world. Therefore, Kenya, and the whole of East Africa region, offers the Маlаysiа Аirlinеs a great market opportunity to enlarge its market size and overcome the threat of competition it is experiencing in the Asian market. MODULE 2 – Analyzing international competitors In general, the global airline industry has increasingly grown and there is intense competition within the industry across the world. For instance, within the Asian market, where the company mainly operates, the company faces international competition from the Singapore Airlines, Garuda Airlines, Cathy Pacific Airlines, Emirates Airlines, Qatar Airlines, China Airlines, as well as Thai International Airways, among others. Furthermore, in its domestic market in Malaysia, the company faces a tough competition from the Malindo Airline, Air Asia and Firefly, among others. Even worse, the Asian market has been entered by more vigorous competitors that are utilizing the low pricing strategy, including the Compass Airlines, Tiger Airways, Jetstar Asia Airways, Cebu Pacific Airlines, Impulse Airlines, as well as the Virgin Blue Airlines. Therefore, the number of competitors is very high, and with the emergence of low cost carrier and deregulation, the competition has increased in the Asian market. This reflects that the Asian market is almost at the maturity stage, and it is very strategic for the company to explore various expansion options, which includes expanding to the emerging markets like East Africa. Nevertheless, being a rapidly developing economy, the airline industry in Kenya is also growing. The main airline in this international market is Kenya Airways, which is widely regarded as among the leading airline operator in the Sub-Saharan Africa. In addition, this main international competitor in the East African market is ranked 4th among the airlines that operate in Africa in respect to seat capacity, behind, the South African Airways, EgyptAir, and Ethiopian Airlines. However, as the main competitor, Kenya Airways, along with other potential competitors in the East African market like the Uganda Airways and RwandAir does not pose a major challenge to the company. This is because of the fact that Kenya Airways has in the recent years been incurring losses, which ultimately affect its capacity for growth. In addition, the main airlines operating in the East African market do not have sufficient capacity to meet the growing needs for airline services in the market. Thus, competition is not a major threat in the airline industry in East Africa, and if the Malaysian Airline capitalize on investing in this market before it is exploited by other international competitors, the potential for the company’s growth is enormous. MODULE 3 – Assessing the economic geographic environment Kenya is a country in the East African region. Its capital city is Nairobi. The country borders with the Indian Ocean to the southeast, Uganda to the west, Tanzania to the south, South Sudan to the Northwest, and Ethiopia to the north, and also lies on the line of Equitor. The economy of Kenya is considered as the largest in the East and Central Africa in terms of GDP, and its capital city, Nairobi, is a major commercial hub in Africa. What is more, Kenya economy is highly dependent on agriculture, mining, and tourism sectors. The industrial sector of the economy remains underdeveloped, but the prospect for its growth are very high in the recent years. Availability of agricultural products for exports, such as coffee, tea, sisal, flowers, and fruits, among other plants of medicinal or food value, as well as the high demand of tourism in East Africa, offers the Malaysian Airlines a high market size. In addition, Kenya has significantly posted tremendous growth in the service sector, which has been boosted by the rapid expansion in financial and telecommunication activities over the last few decades, and now contributes more than 60% of GDP. Today, economic prospects are high with above 5% GDP growth anticipated, which is largely because of expansions in transport, tourism, construction, telecommunications, as well as agriculture. Worth noting, the official currency in Kenya is the Kenya shilling, and the country has a market based economy with liberalized trade policies. In addition, the high dependence on agricultural products and tourism makes the country vulnerable to the economic lows and high. Moreover, the GDP of Kenya has been inconsistent since the country attained independence in 1963. For instance, the country achieved a high economic growth rate of 6%, which fell to below 4%. In the 1990s, the country’s GDP growth rate decreased even further to 1.5%. Inflation rate is another main concern for the Kenyan economy (at 9%), but it is currently lowering as the country continues to experience significant economic, technological, and social development (Bindloss, et al. 2013). More importantly, the leaders of East Africa, including Kenya, Uganda, Rwanda, and Tanzania established an economic block known as the East African Community (EAC), whose objectives include harmonizing customs regimes and tariffs, improving regional infrastructures, as well as enhancing free movement of people. Essentially, the EAC facilitates businesses to consider the Eastern African market as one market. There is a rapid economic growth in East Africa, which increasingly fuels the growth of the air travel in the East African market. This economic growth is also enhanced by the fact that the region is geographically dispersed and countries within the region have a large population attributed to increasing disposable income levels. Essentially, all these geographical and economic factors make Kenya, and the East African market at large, as a most suitable international destination for the Malaysian Airlines. MODULE 4 – Assessing the social culture environment As the Malaysia Airlines target to invest in the international market, Kenya in specific, there is a dire need for it to understand its social culture so as to comprehend the local people’s culture and buying behavior. This includes understanding the citizens' culture in every aspect. In terms of population, Kenya has a diverse population that constitutes about 42 different communities. The ethnic groups in Kenya include Kikuyu 23%, Luhya 15%, Luo 12%, Kalenjin 11%, Kamba 10%, Kisii 5%, Meru 5%, other Africans 16%, while the non-African (European, Arab, and Asian) 2%. More importantly, the country's population speaks two official languages, which include Swahili and English, and these languages are the ones commonly used for business communication in the country. Majority of Kenyans are Christians (83%), and a sizable minority of Muslim and Hindu religions. The western cultural values in Kenya are increasingly becoming more ingrained and the traditional values are disintegrating. The life expectancy in the country is about 54 years, and the literacy rate is 87%. As indicated earlier, Kenya is a diverse country, which makes tribalism to be a major issue. However, tribal stereotypes and regional accents are a main source of amusement across the country. More importantly, Kenyan media is very robust and there is a high level of media flexibility. In addition to the general socio-cultural environment, many people in Kenya are mainly ready to compromise for basic products in exchange for lower prices. In fact, studies have established that price of tickets is the single most important consideration that influences passengers’ decisions in case of conscious leisure passengers that are always looking to make their budgets decrease further. Therefore, it could be a strategic tool for any airline operating in the East African market to consider lowering its prices in order to enhance its competitive advantage in the market. MODULE 5 – Assessing the political legal environment Kenya is a democratic republic and is headed by the president, who is elected after every five years. The president is the head of state and government. In addition, there is a multi-party political system. There are three arms of government, which include the national assembly, judiciary and the executive. Under the current constitution of Kenya, the country is divided into 47 counties, which are semi-autonomous, and are headed by governors. Nevertheless, the post election crisis after the 2007 national elections was a major blow to the country’s regional ad international reputation. However, the recent national election was very peaceful, and currently there is a high political stability in the country. In regard to the investment environment from a political perspective, the government of Kenya has shown a high political will to encourage both the domestic and foreign investors invest in Kenya. In the recent decades, the government of Kenya has increasingly enhanced market liberalization, and there is a strong commitment to increase investment inflows, as well as to improve the legal and business environment in the country. The government is also making remarkable strides towards eliminating the issue of corruption, which has been a great threat inhibiting the country’s economic growth. The country has favorable business laws for commercial investors, including the labor and employment law and law of taxation. Kenya is also a member to various international trade organizations, including the World Trade Organization, World Bank, and the International Monetary Fund, all of which is committed to embracing the international trade laws and standards. More importantly, the governments of the Kenya, as well as the other East African countries, including Rwanda, Uganda and Tanzania have significantly invested in the development of travel and airline infrastructure and have made remarkable developments in the airports in order to make them competitive compared to the rest of the world. In the view of most economic analysts, the East African market will soon be among the top of the global economy growth charts. Phase 2 – Organizing for Global Business Activities MODULE 6 – Selecting a global company structure Upon expanding its global business activities by entering the East African market, it will be very essential for the Malaysian Airlines consider redesigning its organizational structure. This would not only be aimed at incorporating the marketing management of the new international market into the existing organizational structure, but also to enhance better customer experience, efficient operations, effective human capital management, better network, effective use of technology, as well as better development of business and marketing strategies. More importantly, it should be noted that the company is not running away from the Asian market, which has become highly saturated with numerous competitors scrambling to gain a significant market size. Rather, the company is aiming to sustain, or even increase, its market share in the Asian market, as well as to enlarge its market size through entering the emerging global markets, such as East Africa. Essentially, in all its global business operations, the company’s organizational culture should be abided by the values of personal touch, efficiency, warmth, safety, quality, comfort, and punctuality. The recommended organizational framework for global business operations should consist of the director of information technology, director of finance, director of human resource management, director of marketing, director of engineering, director of operations, as well as the regional managers, all of which should report to the company’s chief executive officer. The new areas introduced in the organizational structure include the department of technology, regional market management, as well as improvements to the marketing unit. Essentially, the use of technology should be embraced across all the company’s units with a focus of cutting costs, which would consequently facilitate lowering service prices in order to curb competition. This technology should include an effective passenger service system in order to enhance a more efficient customer service operation so as to meet today’s industry requirements and standards. As suggested, there would be a regional manager for the East African market. Since it is a new international market that has the potential to drive sales for the company in the log run, it is very strategic for the company to consider assigning the market to a regional manager, who would be responsible for overseeing all the company’s operations in the market and reporting directly to the chief executive officer. The main thing for the company’s regional manager in East Africa would be to keenly understand the culture of the local people, as well as other factors that can affect marketing operations, such as economic trends, political factors, legal factors, and environmental factors, among others. More importantly, the company should aim at adapting its business strategies to the local market environment factors, rather than standardizing its strategies to the entire global markets. Improvement of the marketing unit of the company would entail incorporating customer relationship management with the aim of increasing the profitability of customer base, acquiring more customers, as well as optimizing the value of existing customers. Indeed, the use of customer relationship management would be a strategic solution as it would ensure that the airline is able to manage its customers more efficiently in the saturated Asian market, as well as the global emerging markets the company aims to enter in future. In addition, the use of customer relationship management would help the company in retaining high value customers, maximizing customer knowledge in terms of customer value and needs, developing personalized services and improving customer service efficiency for high value customers, as well as improving market efficiency and measuring the effects of individual marketing activities. MODULE 7 – Identifying human resource for global business activities Human resources should be considered as the most strategic asset for the organization, more particularly in a company operating in a service sector. Effective human resource management is inevitable for any company that aims at improving its competitive advantage in today’s market. The business activities involved in human resource management include enhancing employee motivation, training and development, recruitment and staffing, as well as performance evaluations. Recruitment and staffing entails searching for job candidates, screening their qualification, and selecting the most qualified to work for the company. In its global business activities, the company should aim at recruiting the local people. This would give the company with a huge opportunity of being recognized by the locals as a company of their own, which is a great marketing strategy for attracting and retaining local customers. Furthermore, recruiting a mixture of foreign and local employees would ultimately bring about diversity in the organization, which, when facilitated with efficient communication, can lead to increased creativity, knowledge sharing and innovation. Employee motivation would be another key aspect of human resource management. This entails enhancing job satisfaction and morale among employees while at the workplace. Employee motivation and morale can be enhanced by ensuring the employees are provided with sufficient compensation, suitable workplace conditions, clear job description, well designed organizational structure, as well as the use of an effective performance evaluation and reward system. Essentially, the labor market has become very competitive today, and overlooking the issue of employee motivation can ultimately result to increased employee turnover as they shift to other organizations that offer better motivation incentives (Yang, 2010). It is also very critical to provide employees with sufficient training and development programs on a continuous basis. This would be done with an aim of improving the employee competence, updating employees on the new market environment trends, adding their skills and knowledge on the use of new technology, as well as orienting them to the desired organizational culture. Essentially, training and development should be done on the basis of real organizational and market needs, and would include career development, seminars, workshops, and sponsored training sessions. Lastly, but not the least, every employee’s performance would be evaluated for the purposes of appraisals. Performance evaluation would cover all employees from the senior management through the line management to lower level employees. It would be carried out with high level of objectivity and merit, by use of a standardized evaluation approach (Pels, 2012). The aim of this performance evaluation practice would be to reward the high performing employees, as well as to support the poorly performing ones so that they can improve. Phase 3 – Implementing the Global Market Plan MODULE 8 – Selecting an international pricing strategy Compared to other airline companies, the prices offered by the Malaysian Airline to its customers is more expensive than others. This is understandable since, as a five star airline company, the costs required for the maintenance and convenience by Malaysian Airline are quite high. Therefore, the airline usually effect cost that will be purchased by the customers. However, the trends of pricing strategy are increasingly changing with the increased new entrants of low cost carriers (Hazledine, 2011). For instance, Kenya Airways has different categories for pricing, on which there is the first class, business class, and economic class. In this regard, the first class and business class are very expensive, but economic class is quite affordable. As a strategy, it is recommendable that the Malaysian Airlines consider segmenting the Kenyan international market in terms of the income levels. This would include the business people, wealthy people, as well as the middle class and professional people, which are the main market segments in Kenya in the airline industry. As a developing country, Kenya has increased the number of investors, wealth, professional and middle class people who earn more and travel much more frequently overseas. Generally, each of these market segments wants the services that can offer them time efficiency and best services. However, most investors need a business class, while the wealth wants first class, but both of them are in dire need for premium and quality services. On the other hand, professional and middle class people are in dire need for economy class, which is quite affordable. Actually, this market segment is the main one, with many people looking for the airline that offers cheap and discount flights to various destinations across the world. All in all, the game plan that should be implemented by the Malaysian Airline in the Kenyan market is simple enough, which regards to offering customers quality services to places they want to travel to, and at fair and predictable prices. Moe specifically, there would be weekday fares, in both premium and value, which would be aimed mainly for business travelers that are willing to pay a higher price to be able to go and come back during the week. There would also be stay-over weekday fares, in both premium and value, which would be aimed more at the personal or leisure traveler for whom price is more important than traveling midweek. In addition, publicized price discounts would be offered for those customers that make early reservations or purchase tickets in advance, as well as those that reserve tickets in the online platform (Fu, 2013). More importantly, the company should offer seasonal and certain peak-period adjustments to the basic fares or adjustments due to spikes in fuel prices, among other factors. There should also be a standby fare for people that are willing to take what is available at the last minute, which should probably be not more than 5% discount. MODULE 9 – Determining financial results Actualizing global business activities through expanding the company’s market size by entering the East African market will obviously incur some cost. The company will need to acquire new aircraft to deliver services in the new international market, hire an additional workforce to work in the new market, pay for more administration and taxation charges in the new market, as well as incur additional marketing expenses. All in all, the company is estimated to incur a total cost of $2 million in order to effectively enter in the emerging East African market. Fortunately, Malaysian airline is very sound in terms of financial stability, and its revenue base will sufficiently cater for this budgeted expenditure for market expansion to international markets. Since the East African market has been established to be very favorable for investment with significant political stability, promising economic growth, and suitable cultures, it is anticipated that the company will recover the cost of market expansion within the next three years. MODULE 10 – Measuring international business success There will be various success indicators that will be used by the company to measure the international business success. They include the changes in market share, the level of traffic in the company’s website, sales volume, the rate of employee turnover, the level of customer satisfaction, as well as brand equity. Essentially, the changes in market share and sales volume would be measured through the use of the actual sales volume and revenue in comparison to the competition sales performance. The rate of employee turnover would also be assessed so as to evaluate the success of the company’s motivational incentives and programs, which ultimately reflect the level of quality performance. More importantly, various tools of research methodology, such as survey, would also be utilized in the marketplace in order to evaluate the level of customer satisfaction and brand equity (Rust, Lemon & Zeithaml, 2004). This would entail collecting primary data from customers in relation to brand awareness and customer services provided by the company, and then analyzing it in order to gain views from the customers’ perspective. Essentially, the measurement of international business success would all be aimed at identifying the issues curbing the international business success and consequently taking corrective measures for improvement in order to enhance the company’s competitive advantage in the global market. Reference Bindloss, J., Finlay, H., Crowther, G., Fletcher, M., & Parkinson, T. (2013). Kenya. Footscray, Vic: Lonely Planet. Fu, Y. K. (2013). The influence of internal marketing by airlines on customer-oriented behavior: A test of the mediating effect of emotional labor. Journal of Air Transport Management, 32, 49-57. Hazledine, T. (2011). Legacy carriers fight back: Pricing and product differentiation in modern airline marketing. Journal of Air Transport Management, 17(2), 129-134. Pels, E. (2012). Airline network competition: Full-service airlines, low-cost airlines and long- haul markets. Research in Transportation Economics, 24(1), 68-74. Rust, R. T., Lemon, K. N., & Zeithaml, V. A. (2004). Return on Marketing: Using Customer Equity to Focus Marketing Strategy. Journal of Marketing. 68(1), p.109-127. Yang, H. (2010). Airlinesʼ futures. Journal of Revenue and Pricing Management. 6(4), p.309- 311. Read More