Marketing Opportunities of the Airline Industry in Australia - Term Paper Example

Marketing Opportunities Markets always change faster than Marketing. Today many companies are disappointed over marketing's inability to produce measurable result. While companies unabashedly declare their wish to get closer to customers, marketing actually losing power to other functions in the corporation. A company has many resources in its land but availability of resources plays a major role in search for opportunities. In the era of information revolution where geographical locations are becoming immaterial day-by-day, communication technologies are one of the basic resources, which always play's a crucial role in search, and exploitation of opportunities. In any organization, there are some tangible and intangible assets, which are used as resources, when company is searching and evaluating various opportunities. Basically marketing activity focuses on assessing and satisfying customer needs, with in the organization; management is responsible for establishing these goals. These are certain resources i. e., key people groups, forces outside the organizations, channels, brand values, relationship, partnership, suppliers, buyers etc. apart from physical resources like technology. In search of opportunities skill of the people working with in the organization always play's a crucial role, opportunities lies in best marketing research to know about innovative product requirements its time and cost well in advance and to exploit these requirements. Best marketing research need more strong financial background and personal skills. Shortage and delay in adopting, technologies plays crucial role in searching opportunities. Intangible like brand plays major role in exploring opportunities. When a particular brand already exists in the market and it launches some product in the market, needs lesser advertisement and hence needs less cost investment, but if brand is new and it is to be launched, needs more expensive and exhaustive promotional campaign. In present era, where consumer needs are changing continuously and fastly meeting consumer needs and preferences always cost heavily on the company. Firms spend billions of dollars annually in search of new opportunities on marketing and technical research to add to brand value and product improvement. For example, Hot Pockets, especially formulated meat and cheese, microwavable sandwiches and more than 20 varieties have been introduced but in 2002, after Nestle acquire chef America, it has added its marketing muscle to promote the brand, ability to invest in technologies, training to enhance skills of its employees, upgrading the skill of an employee are few of the resources which could limit the search for the opportunities by the company. In any company search of opportunities needs financial resources, skill of its employees, its brand value, its technologies adoption, its organizational capabilities, and its ability to conduct market research as nearer to actual. Now as a marketing manager, one has been assigned a vital job is that of recognizing the nature of competition, the potential threats competitors may represent and development of opportunities response strategies. Michael Porter (1980) has proposed that competitive threats can be classified into five major steps: The threat of other producer firms already operating within the market sector (Kotler, 2003). The threats of customer moving up stream to also become producers and / or using their purchasing power to dominate terms and condition for purchase. The threat of supplier moving downstream to become a producer or using their control over critical resources to dominate terms and condition of sale. The threat of a substitute entering the market always been seen carefully. Finally the threat for new entrant who was not previously a major player in the market has to be analyzed properly. To avoid head on competition with competitors, Marketing manager has to opt certain initiatives, which must be strategic, cross functional and bottom-line oriented. Marketing manager has to create meaningful differentiation through strategic segments requires dedicating unique value networks, serving in individual strategic segment. Replicating a value network is more difficult than copying a marketing mix. Now as a marketing Manager, he has to shift his / her priorities from selling just a product to provide a solution. It they want their companies to enhance customer loyalty and alleviate pricing pressures by offering customer solutions instead products. Companies as diverse as Baxter International, www.grainger, Home Depot and IBM recognized these demands. The next emphasis will be on developing innovative channels of distribution. Direct distribution strategy like Dell, Internet like eBay, Amazon are technology intensive and their competitive advantage over existing channels usually involves greater reach and superior efficiency. In the changing and challenging market environment, Marketing manager must understand that, without innovation companies risk their future growth and profitability, and so they devote considerable resources to launching new product. Now marketing managers must transform marketing as strategic business unit to corporate marketing and focus on customers. By adopting such measures Marketing managers avoid head-on competition from their competitors and forge ahead. From an airline industry perspective, Australia comprises about a dozen key cities, most of which are separated by long distances and near the coast of a large island continent. There are about another sixty towns, some of which are inland and remote. For most of the post-1945 period, the Australian government had a "two-airline" policy, which was, in effect, a cozy duopoly whereby the domestic market was shared between Qantas and Ansett. Qantas was founded in 1920 and is Australia's dominant legacy carrier. Since it was privatized in the 1990s it has operated profitably in international and domestic air services and a range of related businesses. Following several short-lived attempts since the 1980s to start a third domestic airline, Impulse and Virgin Blue (VB) were launched in 2000. Their launch reduced fares to historically low levels. Qantas and Ansett dropped their fares to match start-up deals. As Ansett and Qantas had higher overheads, the fare reductions challenged Qantas and induced losses for Ansett. Against the background of this price war, Qantas took over Impulse, which was later relaunched as Jetstar (JS). "Virgin branded, low cost, low fare carrier operating in the Australian domestic market" (Virgin Blue 2003, 52). The LCC model that Godfrey proposed was similar to Southwest Airlines (SWA): a "no frills" airline. Godfrey said, "the airlines that are clearly succeeding are those that have stuck to the consumer friendly South West low fare model" (CAPA 2002, 34). To respond to the competitive threat of VB, Qantas CEO Geoff Dixon drew a "line in the sand" by creating JS, to restrict VB and other carriers from taking more than 35 percent of the domestic market (Harcourt 2004). Qantas adopted a "pincer-movement" strategy: it established an LCC to compete with VB on price, especially in growing leisure markets, whilst using Qantas as an FSA to concentrate on business markets. Qantas intended to force VB to respond either by reducing costs to compete with JS or by increasing costs to compete with Qantas in the corporate market. This strategy, using two brands to target different markets, aimed to close the gap at the lower end of the domestic market and also to reduce the risk of "cannibalization" of the mainline carrier. (Such cannibalization had occurred between British Airways and its low-cost carrier, GO.) The parent companies of JS and VB played different roles. From its inception, VB's competitive position was assisted by public recognition of the Virgin brand. However, after its first couple of years, VB had relatively little direct association with the Virgin Group other than in branding (Virgin Blue 2003). Qantas intended to force VB to respond either by reducing costs to compete with JS or by increasing costs to compete with Qantas in the corporate market. This strategy, using two brands to target different markets, aimed to close the gap at the lower end of the domestic market and also to reduce the risk of "cannibalization" of the mainline carrier. (Such cannibalization had occurred between British Airways and its low-cost carrier, GO.) The parent companies of JS and VB played different roles. From its inception, VB's competitive position was assisted by public recognition of the Virgin brand. However, after its first couple of years, VB had relatively little direct association with the Virgin Group other than in branding (Virgin Blue 2003). (The Australian aviation industry accessed from the website http://www.press.uillinois.edu/journals/lera/proceedings2006/bamber.html on 16th February 2008.). Difference in performance between organizations in the same market is rarely explainable by differences in their resource base since resources can be imitated or traded. Superior performance will also be determine by the way in which resources are deployed to create competencies in the organizations activities. Core competencies are activities or processes that critically underpin an organizations competitive advantage. Competitive advantage of a company always depends on its core competencies. The competence leads to levels of performances form an activity or process that are significantly better than competitors. It the company do not have competitive advantage over its competitors their growth will be short-lived, organizations, will be out performed by competitors until they do not have competitive advantage over its competitors. Competencies should be distinctive enough to provide a competitive advantage a unique strength relative to competitors often based on quality, time cost or innovation example HP had a truly competitive advantage with its fast life cycle time, which allowed it to bring innovative products to market in large volume rapidly. Changes in the marketing environment are a source of opportunities and threats to be managed. Environmental trends arise typically from five sources: Social, economic, technological, competitive and regulatory forces. The social forces of the environment include the demographic characteristics of the population and its values. Changes in these forces can have a dramatic impact on marketing strategy. Apart from demographics cultural, racial and ethnic diversity and changing values a major role in deciding marketing strategy. As we know the baby boomer are graying in America and they are receptive to anything that makes then feel younger, generally. In line to it, Olay's total effects product line, for example, includes anti-aging creams, moisturizers, cleansing cloths and restoration treatment designed for this age group. The second component of environmental scan, the economy, pertains to the income, expenditure and resources that affect cost of running a business and household. If the macroeconomic condition of the economy is in an inflationary situation, cost of products escalates and the no of items consumers can buy decreases. In a recessive economy, economic activities got slow. Business decrease production, unemployment rises and many consumers have less money to spend Chrysler, a major car manufacturer, for example uses the survey and general economic conditions to plan its automobile production and avoid producing too many or too few cars. Technology the third environmental factor refers to inventions or innovations from applied science or engineering research. The transformative power of technology may be best illustrated by the rapid growth of market space, an information and communication-based electronic environment mostly occupied by sophisticated computer and telecommunication technologies and digitized offerings. Many companies have adopted Internet-based technology internally to support their electronic business strategy. Extranet, which uses Internet-based technologies, is permitting communication between a company and its supplier distributors and other partners. The fourth component of the environmental scan, Competition refers to alternative firms that could provide a product to satisfy a specific market's needs. There are various forms of competition and each company must consider its present and potential competitor in designing its marketing strategy. For example in oligopoly, a common industry structure occurs when a few Companies control the majority of industry sales. In telecommunication segment AT&T, MCI, Verizon and Sprit, control approximately 80% of the $16 billion international long distance telephone service markets in US. Finally in any organization, the marketing and broader business decisions are constrained, directed and influenced by regulatory forces. Regulations exist to protect companies as well as consumers. Much of the regulation from the federal and state levels is the result of an active political process and has been passed on to ensure competition and fair business practices. For consumers, the focus of legislation is to protect them from unfair trade practices and ensure safety. Trademark protections is one such regulation which affect the marketing practices one of the recent changes in trademark law is the U.S. supreme courts ruling that companies may obtain trademarks for colors associated with their products. In other recent additions of trademark law is the Federal Dilution Act (1995) which is used to prevent someone from using a trademark on a no competing products e.g. "Cadillac" brushes. The choice of market entry and thereafter market penetration to expand marketing opportunities always has been a marketing strategy, which ultimately decide the success of a company. To expand the business and to reach out more marketing segments through fulfilling their requirements, is the marketing penetration through which a company will be able to generate new needs or replace older products. Whereas the product development strategies focus on whether a company extends or adopts its product and promotion message for consumers in different countries and cultures. Product developments have three ways i. e. the same product, 'or' some adaptation or totally new products. Companies like coca cola, Gillette razors, Sony are marketing the same products worldwide. Products adaptations such as Exxon sell different gasoline blends on each country's climate. Product invention such as Black and Decker did this with its Snake light flexible flashlight altogether create new market segment. Market development and diversification is also one of the important marketing strategy, companies have to adopt sooner or later. By attracting their customers offering them variety of previously defined market segments, new market coalesces around the market driving firms product service offering and marketing strategy. This creates havoc in the industry by destroying the industry segmentation that existed prior to the market drivers' entry and replacing it with a new set of segments reflecting the new altered landscape. Southwest Airlines destroyed the segmentation between ground transportation and airlines, attracting many who would not otherwise have flown at all. Wal-Mart demonstrated that small rural towns could support type discount stores, which previously had been located only in large urban areas. Both the companies penetrated the market, offer new products and services at a low cost, included more customers into their fold and diversified successfully. SW airlines always set prices much lower than those previously available for similar products. This puts existing competitors under tremendous pressure. In the present geo-political situations and ever-changing technological and economic situation identifying the opportunities properly and timely decide the success of the companies Company, which seizes the opportunities and exploiting it could be more successful in a hyper competitive market. Identification of opportunities starts with companies to identify the industry scope in which a company has to operate or operating, in which direction the overall industry trends are going. The next step of the company will be to identify the range of products and services applications that a company has to supply. The range of technological and other core competencies that a company will master and leverage will be the next thing company will screen. The market segment, the type of market or customers, the area in which company serve has to be screened for marketing opportunities. The marketing opportunities may lies in any specifies geographical location such as emerging economies like India or China may be the area which has to be screened for marketing opportunity. Marketing opportunities needs elaborate Micro and Macro factors analysis, which could have the potential to affect the performance of the company. In Australia all the four major TV networks shared almost all the audiences and prime time but widening penetration of cable Television and Variety of programs offered as well as legislation in 1997 changed the scenario of advertising market. But the main weaknesses these cable TV network faces is that they do not have internal networking and individually they have lesser audiences. Number of viewers always be the crucial factor for advertising revenue earning's. The competitors are not affecting very significantly to the existing TV networks but even then these cable network has changed the competitive complexion of the industry. Changes in the competitive, economic and technological environment obviously affect the marketing strategy of the major networks. They have to offer the programs of greater variety especially as per the likings of the viewers. Exchange of programs is more likely. They have to upgrade the technological capabilities to reach out to more and more viewers. Market penetration and offering varieties in their programs must be the main strategies to be adopted. They have to be more competitive in the price offering for advertisements and they must be more and more nearer to the prices offered by cable network. Though this may minimize revenue earnings but marketing properly and aggressively may compensate advertising revenue loss. They have to invest more money to remain competitive and a proper cost effectiveness has to be worked out. References: 1. CAPA. 2002. Low Cost Airlines in the Asian Pacific Region: An Exceptional Intra-RegionalTraffic Growth Opportunity. Report, Centre for Asia Pacific Aviation, Sydney. 2. Harcourt, Tansy. 2004. "Qantas in Radical Plan for Jetstar." Australian Financial Review, February 25, p. 1. 3. Kotler, P. (2003) A Framework for marketing management, Pearson education Singapore pte. Ltd 4. The Australian aviation industry accessed from the website http://www.press.uillinois.edu/journals/lera/proceedings2006/bamber.html on 16th February 2008. 5. Virgin Blue. 2003. "Prospectus." Available at http://www.virginblue.com.au/pdfs/investors/ shareoffer/Virgin_Blue_Prospectus_17nov03.pdf. Read More