International Business and Globalisation - Etihad Airways - Case Study Example

Student’s Name Instructor’s Name Course Date International Business and Globalisation Introduction Etihad Airways is the leading Airline in UAE since its establishment in 2003 (Pederson 93). It is the national airline of the United Arabs Emirates and the fast growing airline company worldwide always seeking to expand its market base. This report aims at examining the current services and products offered by Etihad Airways, its geographical market and the marketing position of its potential entry into India Aviation industry. The report will detail out the suitability of India as a potential market for Etihad Airways taking into consideration 10 suitability factors and the score of each factor. In addition, the paper will also formulate a marketing mix that would be used by Etihad in the Indian market and the Human Resource Management staffing policy the company should use in the new market. Moreover, the report will highlight the market entry strategies used by the company considering the advantages and disadvantages of each and establishing the suitable entry mode to be used by Etihad in entering the Indian market. This report is written with an aim of providing a market entry analysis that can be used by Etihad when entering into Indian market. Company Background Etihad Airways stands out as the leading Airline in UAE and has it’s headquarter at Abu Dhabi (Pederson 90). The airline operates by means of travel agents who act as their sales agents in more than 42 countries globally. Currently, the airline serves international market of over 64 destinations around the world. Markets served by Etihad Airways include North America, Europe, South Africa, South Asian countries, Australia, Africa to name a few. On average, Etihad operates around 147 flights daily and over 1,032 flights weekly (Etihad Airways 1). The airline has about 54 aircrafts and has shared agreement with 23 global airlines as a means of building its global network. The main business of Etihad Airways is to carry out international transportation of passengers. It has three major product types including Diamond First Class, Coral Economy Class and also Pearl Business Class. In addition, the airline has operations in the tourism sector through Etihad Holidays. The product and service portfolio for the airline include 60% of international transportation, 30% Crystal Cargo and 10% of Etihad Holiday. Etihad Airways targets the middle class and luxury and high class social sector (Etihad Airways 1). Indian Market Analysis Indian aviation market is very competitive with players such as Singapore Airlines, British Airways, French Airways, Emirates Airways and Air Arabia to name a few. However, the potential for market is very huge. India is one of the biggest economies globally with regard to economic growth (Bhagwati, Iagdish and Arvind 116). India is among the fast growing economies worldwide. One reason why India is a good potential market for Etihad Airways is because it is the biggest and firmest growing middle class country. The suitability score of this factor is 8/10. This is because, it has more than one billion people and most of these people are middle class individuals (Bhagwati Iagdish and Arvind 122). Therefore, the purchasing power of citizens in India has gone up with need of luxury. India also has more than 70 domestic Airports and over 12 international Airports with potential suitability score of 6/10. Although the facilities in the country are not to the world standard, the economy is rapidly growing with the need to getting higher too. This factor favours India as a potential destination for Etihad Airways’ new market in Asia. In addition, taking in consideration the business class segment in the country, the growing population together with high earning of individuals in India will provide customer bases for Etihad Airways market with attractiveness score of about 7/10. Approximately, the target market for Etihad Airways will be individuals of annual income more than Rs. 10 lacks. In India, approximately 7% of the population falls in this category; 7% belong to the customer base for the first class and business class segment (Bhagwati Iagdish and Arvind 123). In India, the direct competitors of Etihad Airways will include the Emirates Airlines, British Airways, Air Arabia to name a few. The indirect competitors of Etihad Airways will include the Telecom Industry and Holiday Cruise industry (Verma 78). The Telecom industry has simplified communication, hence people would not have to travel for meeting for they can just use cheaper video calling. The biggest competitor in the Indian market will be the Emirate Airways as customers receive larger value due to their 25 year old existence in the industry. For this, Etihad would have to change some strategies and lower prices in the first and business class segment. The suitability score of this factor is approximately 5/10. The suitability score for the potential Indian market for Etihad Airways in terms of corruption levels is 4/10. Corruption level in India is considered vital issues affecting its economy. The causes of high levels of corruption in the country are attributed to excessive business regulations, licensing systems and complicated tax system. Just like any other business, airline business is affected by the corruption in terms of award of contracts, protection of property rights etc. Since its independent, India has moved to higher growth trajectory due to its political stability. The increase in growth of the economy has been attributed to high political stability and thus the suitability score of India as a potential market for Etihad with regard to this factor is about 7/10. With the growing economy in India however, the airline industry in the country is considered a mess since the taxes are very high and the profits margins are thin (Verma 91). In total, airlines in the country have reported losses of approximately $10 billion with cumulative debt of $16 billion. Therefore, this may be a challenge for Etihad and the suitability score of this factor is 4/10. In contrast, with the high population in the country, India is ranked one of the countries that have labour availability thereby labour force for Etihad airways will not be a problem if it enters the market and thus labour availability factor has suitability score of 8/10. Also, the government of India has established friendly policies for international investors and business companies in order to enhance the attractiveness of its market. This has led to it being an attractive destination for Etihad owing to suitability score of about 7/10. The HRM staffing policy to be implemented by Etihad Airways is the polycentric staffing where the home country individuals are assigned the top positions as this facilitates organisational learning of the foreign market and offer an opportunity for local individuals to improve their careers. Marketing mix and Staffing policy Product strategy With regard to first class and business class of people, Etihad Airways segregate its service as Diamond First Class and Pearl Business class (Etihad Airways 2). The airline’s augmented products offer maximum competitive advantage. Also, Abu Dhabi being the sort out destination for tourism gives the airline location advantage (Etihad Airways 2). Moreover, the company should chauffer services for the customers India for first class and business class. Etihad should provide a 24 hours departure facility in India. Price strategy Etihad Airways should establish a penetration pricing approach in order to increase its market share in India. If the airline can deliver similar services at lower price as its competitors, it will have a chance to achieve a break-even. Once this is done, it can then raise its prices by 5 % falling in the same category as the competitors. Doing this will not make the customer perceive the airline as a low cost carrier thus ending up damaging the company’s image in the long run. Place strategy Etihad should avail booking facility at the main offices and increase sales in India. In addition, the company can increase capacity of ticket distribution in its corporate website enabling the first class and business class customers to customize their travel. Also, Etihad Airways should aim at increasing the sales agents leading to increasing sales. Promotion strategy Etihad airways should invest on sales promotion which will help in enhancing the market penetration. The company can also use direct marketing where the staff exercises direct word-of-mouth marketing which is highly appreciated in India. Also, sponsorship and involvement in events taking place in India will be much appreciated by the first class and business class people (Etihad Airways 2). Market Entry Strategy Market entry strategies include exporting which is marketing of products produced in one nation into another (Verma 87). It has the advantage of not being too risky and offer opportunity to learn the oversee market before fully investing. The disadvantage is mainly that the company is at the mercy of oversees’ agents. Another market entry mode is licencing is where a company in a particular country permits a firm in other country to utilize the skill, manufacturing or processing by the licensor. The advantages are that company has option to buy into partner and opens door for low risk relationships. The disadvantages are that it is considered limited form of partnership and potential returns may be lost. Joint venture is another market entry strategy that can be used by Etihad airways. It has the advantage of joint financial strength and there is sharing of risk. The disadvantages are that of disagreement on third party markets and no full control of management. Another strategy is ownership which involves commitment in finances and managerial effort which is very risky. The best market entry strategy is joint venture as it will enable Etihad gain financial strength and reduce risks (Ahmed 10). Conclusion Etihad Airways was established in 2003 and is often looking for new market to expand its market base. The potential market for Etihad is India since it has fast growing economy, high political stability, it is fast growing middle class country etc. Etihad should therefore use an effective marketing mix with regard to product, price, promotion and pricing in order to enable successful entry into the Indian market. In addition, with a good number of market entry strategies available for Etihad such as licencing, franchising, joint venture and ownership, joint venture is the best strategy to be used by Etihad Airways due to many advantages it has such as lower risks and increase in financial strengths. Works Cited 10. Al-Ali H, Ahmad S. Etihad Airlines: growth through successful strategic partnerships. Em Mkts Case Studies. 2014;4(5):1-17. doi:10.1108/eemcs-09-2013-0184. Bhagwati, Jagdish N., and Arvind Panagariya. Why growth matters : how economic growth in India reduced poverty and the lessons for other developing countries. New York: PublicAffairs, 2013. Print. Emirates Airline, Make a Booking- Emirates. Retrived August 22, 2010, from Emirates Airline Corporate Website: http://fly1.emirates.com/B=IBE/ResultByPrice.asp Pederson, Jay P. International Directory of Company Histories. Farmington Hills: Cengage Gale, 2009. Print. Verma, Harsh V. Services marketing text and cases. New Delhi, India: Pearson Education/Dorling Kindersley, 2012. Print. Read More