Air China's Global Branding and the Internationalization Process - Case Study Example

International Marketing Report Introduction Please find here with our report that addresses your concerns regarding global branding and the internationalization process for Air China. Application of Quelch’s (1999) seven features of global brands Strength in home market In September 30th 2004 Air China Company was found in Beijing with 23.000 employees, registered capital of RMB 6.5 billion and the paid up capital of RMB 9.433 billion. The company provides more than 6.000 weekly flights and offers 1 million seats, it’s fleet consists of 224 Boeing and Airbus planes, they operate 243 routes among of which are 69 international routes, 6 regional and 168 domestic routes. In 26 domestic aerodromes Air China is the operating center loading distribution. It secures 170 flights each day and thus makes it the first domestic airline utilising the "center loading distribution" work mode. Having powerful sales network and strong domestic transport capacity, Air China occupies 55% of total of ground services that they provide at the Beijing Capital International Airport. Having said that Air China has the largest scale and the strongest guarantee capacity in the China Civil Air Industry. Air China has numerous branchesin china such as“Southwest, Zhejiang Province, Chongqing, Inner Mongolia, Tianjin, Guizhou Province, Tibet and bases in Shanghai and Southern China. It also owns a project technology branch, a business plane branch, Aircraft Maintenance & Engineering Corporation (Ameco Beijing), China International Freight Transport Airline Co. Ltd. and Beijing Air Food Company”. In addition Air China also holds shares of “Shenzhen Airline and Cathay Pacific Airline”. It is the largest stockholder of “Shangdong Aviation Group Co. Ltd.”, and dominated “Macao Airline Co. Ltd”. until the end of March 2008”. The World Brand Laboratory has evaluated Air China at RMB 23.523 billion in 2007 and has been appraised as the 27th of China’ most 500 valuable brands and holdsthe first position of brand value among domestic airlines. Overall Air China isthe most successful domestic airline brand in home market. It is the strongest and the biggest national airline company in terms of fleet, revenue and operations.It has been maintaining its dominance in every sector of aviation services in China, whether it is ground services orpassenger flights. Moreover it is the only airline that carries a national flag, this means that the companyreceives strong support from the Civil Aviation Administration of China (CAAC) as well as the government. Furthermore the company received numerous awards amongst of which “Best Chinese Airline”, “Top 25 Exemplary Annual Brand of China – Brand China Huapu Award” and Chinese Brand Annual prize No.1” by Chinese brand annual prize evaluation activity held by the World Brand Laboratory. Quick development of brand influence reflects that the management of the company is being constantly improved and its wide-ranging powers in the aviation industry are being reinforced on a regular basis. Geographical/Balance in Sales: To become a brand of international repute, the company has to make its name popular among the international customers. There lies agap between brand awareness and brand recognition. “Brand awareness is the function of communication only, while brand recognition is a result of the brand perception” (Gelder, 2005, p.149). Brand recognition assists the consumers to identify the exclusivity of one over others. Compared to the developed nations like UK and America, Chinese brands do not enjoy the recognition that would earn them the desired respect from the international clientele. Often the concept of country of origin is applied to understand how well the company diversified its business in different international markets. A brand is considered international, only when it enjoys high market share in different international markets. “Born Global” is the key strategy followed by the contemporary companies to place itself at the global platform. The “Born Global” companies derive competitive advantage by entering the international market from the initial phases of their inception. This stands in contrast with the traditional ones who first try to enhance the market shares in the local market before venturing into the international markets (Cavusgil & Knight, 2009, p.1) At present, due to a strong domestic and international transport capacity Air China is one of the leading international brands in China. This Chinese Airline Company succeeded in developing a strong sales network not only in China but also in the international markets. The company shares its code with some of the well-known international airline brands for developing a solid network not just throughout the world but also in its home country. #1) International and local sales Departments:#2)2009 Sales Figuresin Billions: The brand has adjusted its sales and marketing approach to improveperformance in reaction to the current market conditions. The growth in the total client base was 15.7% that comprises of both domestic as well as international clients. The revenue contribution by geographical segment is as follows: Location Percentage Mainland China 61.02% Hong Kong, Macau & Taiwan 5.45% Europe 12.69% North America 8.32% Japan & Korea 6.96% Asia Pacific & Others 5.56% The company is increasingly diversifying its business in different parts of the world and as a result this helps the brand to earn a reputable name at home as well as in international markets. Moreover Air China is a favorable recognition among its international customers. Addresses similar consumer needs worldwide: -Q)))) does the company addresses the similar consumer needs in other countries, and what level of standardization does it have in it’s marketing policy. Category Details (services) Countries were they are offered Products/Services: Airline Operations 1. Air passenger service 1. The company has a dense network through which it offers its services to domestic as well as international clients. 2. The company is operating in countries like Australia, Brazil, China, France, Germany, Greece, Hong Kong, India, Indonesia, Italy, Japan, Malaysia, Mongolia, Myanmar, Nepal, Pakistan, Philippines, Republic of Korea, Russia, Singapore, Spain, Sweden, Taiwan, Thailand, United Arab and Vietnam. For each of these countries the company has developed individual website that is available in English as well as in local language. This provide a better platform to the passengers to interact 3. The company has made collaboration with 20 international aviation companies so that it can enter in many international markets. In 2009 41.28 million passengers availed the service offered by the company. Passenger capacity in domestic route increased by 18.46% in 2009. However in international market the passenger capacity it declined by 5.51%. 4. At present the company has 224 Boning Airbus that operates in 28 countries through 69 international routes, 6 regional routes and 168 domestic routes. 2. Air cargo service 1. In the cargo division of Air China the company maintains 747 freighters that fly in-between 14 destinations worldwide. As said by the company, it has a plan to add 10 new Boeing 747 plans. Global air traffic increased by 23% in 2009 and this resulted in increase of 4.5 million tons in the air cargo division. 2. The company had a joint verdure with Cathy Pacific in Shanghai. This was an effective step for further enhancement of cargo business in international market. 3. Air China is considered as world’s largest cargo carrier in terms of market share (BBC NEWS, 2010 Engineering Services 1. Maintenance of aircraft 2. Overhauling 3. Repair 1. In Early 2010 The company signed a maintenance agreement of 10 years with Collins Aviation Maintenance Services Shanghai Limited (CAMSS). CAMSS has network throughout the world and it provides engineering service along with other services in more than 80 countries. 2. Air China is developing strategic partnership with many international suppliers. 3. This division is responsible for providing an international level service to the aircraft used by the airline itself. 3. This section is responsible for 43 years of safe piloting and this assists Air Chain to build a strong international brand. 4. The company has joint venture with Lufthansa Airlines for providing engineering services to Boeing and Airbus airlines. Airport Terminal Services 1. Check-in service 2. Boarding service 3. Irregular flight passenger services 4. Tarmac load and unload services 1. This section provides quality service to 35 international airlines as well as 13 domestic aviation groups. 2. These services occupy 55 percent of the total ground services required by an airline. Price: 1. The common pricing strategy in Chinese firm is to price the products or service below the prices prevailing in international market and this gives them an image of “Made in China” that refers to low price and poor quality. However Air China maintains prices as per the international standards. This assists in coming out of the brand image of “made in China”. 2. In the domestic country due to economies of scale the company managed to attain price leadership. Place: 1. Air China is enhancing its strategic collaboration with many international aviation companies. This assists Air China to develop a dense network in different part of the world to further increase the customer base. 2. At present the company has collaboration with 20 international airlines and Air China offers its service in 28 countries. 3. As per the market experts Air China is planning to raise more capital through fresh issue of share and the capital will be used to develop M&A. Thus the company has plans for further extension of its international network. Promotion: 1. The company believes that strong advertising policy assist in attracting and retaining the customers. 2. The company follows different advertising strategy, as for example the e-commerce is an easy way of advertising and it is also cost effective. 3. Air China uses national flag and the picture of Phoenix to symbolize loyalty and good luck. Air China, has a well trained fleet of employee base to provide world class service to the passengers. The company has more than 9000 engineers and technicians to assist the company in providing comfortable journey to its customer as well as to the passengers of other 80 airlines in alliance with it. The company offers almost same services throughout the world; hence their services are more structured in nature. Therefore it can be concluded that Air China offers high quality service to its customers and addresses similar needs worldwide. Such efforts are sure to bear fruit and very soon will Air China find itself to be one of the most respected names in the international aviation industry. Consistent positioning Q)))) According to the consistent positioning, does the company demonstratively has the same set of values worldwide????? The company uses positioning strategy to introduce its products or service to the target customers. “Positioning is an organised system of finding a window in the prospect’s mind.” (Kalb, 1996, p.28) Air China is the 5th largest airline in Asia and has acquired the 5th rank in the world in terms of its domestic cargo traffic. It enjoys 18th position in fleet size in the worldwide ranking (China Economic Review, 2010). As per the mission statement of Air China the foremost mission is to satisfy customer’s demand in best possible way. The mission statement clearly specifies that satisfaction of the customer comes before satisfaction of the shareholders, the employees and the company. The above given mission defines how much the company is concern regarding satisfaction of its customer. For satisfying the customers it is important to develop a well know brand image among the employees. The 2007 Global Top 500 Brands List revealed that this list has 12 Chinese companies and Air China is one among them. Air China occupied 461th rank among top 500 companies of the world that have a strong international brand. The company pays huge importance toward developing an international brand image in the market ((Air China, 2008). In April 25 and 26 the company conducted a brand building workshop. The experts from Boeing gave suggestion to the company for successful international brand marketing. For developing a strong brand image the company follows strong advertising strategy, as for example it is the only airline that flies with the national flag. This flag symbolises loyalty and safety as important principles followed by the company. Apart for the domestic market, even in international market the company succeeded in presenting its brand as a highly reliable one. The company offered separate brand for each of the countries where it is operating that can be accessed in English or in the local language of the country. In this way the company conveys that customer’s comfort and satisfaction is most important for the company. The company itself accepted that it has a strong brand value in international market and the company uses strong brand image to gain core competency in the aviation industry. The company often introduces certain innovation in the services to attract and to retain customers. Almost all these innovations are pointed toward better satisfaction for the customer of Air China. In last few years the company developed strategic collaboration with many international aviation companies. This assists Air China in overcoming the gap between service quality offered by domestic airlines in China and the service quality offered by international aviation companies. Air China is one of the 500 top international bands of the world but still it is a long way to go for the company to be among the top leaders in aviation industry. Outside China the company’s market share is not that high. There are many international aviation companies which enjoy a strong brand image; hence Air China follows a strategy of collaborating with them. This assists the company to position itself as a strong international brand. Consumer value the country-of-origin:(COO EFFECT GOES HERE) ‘Country of origin’ is of great importance for the consumers because they nurture certain pre conceived notions and assess the products and services accordingly. (Samli, 1995, p.117) As per Samil and his colleague (1993), there are four basic parameters used by the buyer to collect clues regarding the products and services. These are physical products, service, package and country of origin. The products or services offered by China carries a tag “made in China” and in international market theses products and services are considered to be of low quality with poor safety measures (Interbrand-a, 2008, p.01). However on the other hand, there are many Chinese companies like Lenovo and Tsingtao that have succeeded in overcoming this tarnished image (Short, n.d.p.4). The Chinese brands are still behind the well known brands of the developed nations (Interbrand, 2007, p.4). Air China is well aware of the fact that to become a true international brand it needs to overcome the halo effect of “COO” so the company made several acquisition and mergers with different international aviation companies. At present the service quality offered by Air China almost equivalent to that of international standard. The company maintains partnership with several international aviation partners like United Airlines, Lufthansa (Germany), All Nippon Airways (NH), Austrian Airlines (OS), Hong Kong Cathay Pacific Airlines (CX), Air New Zealand, Virgin Atlantic Airways Limited and few others (Air China-b, n.d.). Such partnership has helped the company to provide its services in different parts of the world. In December 2007, Air China took the historical decision of joining Star Alliance that is considered as the world’s largest alliance among airlines. This strategy was adopted with the motto to enhance the brand name of Air China in the international market and help it to shed off the image “made in China” (Air China-c, n.d.). In March 2010, the company announced that it will issue new A & H shares for raising around 6.5 billion Yuan ($952 million) and the company will use this for M&A so that it can overcome the concept of “made in China” (Reuters, 2010). After considering the strategy executed by Air China for enhancing its market share and brand image in the international market it can be concluded that the company is trying hard to make its brand a truly globalised one. This will assist the company to come out from the halo effect of the country of origin i.e. “made in China”. Product category focus: Almost all the market leaders in the international markets develop a core competency which reflects their specialisation. It can be said that these companies focus mainly on certain product categories and become specialist in that particular sector. When a company focuses on a specific product category it gains specific competency, more commonly known as core competency of the company. Such core competencies are easy to build and the competitors cannot easily imitate them (Drejer, 2002, p.78). In China, majority of the companies operate in groups that help them to maintain a diversified business and to operate in different industries. These companies use the same brand name to promote their corporate brand but often it hampers the brand image of different products and services offered by the company. For example, that if one talks of innovative cars the first name that comes to mind is Toyota because the company uses this name to promote its automobile business. Air China has realised this fact and hence the company uses the brand image solely for its aviation business and airline related businesses. The airline operation segment deals with air passengers and cargo services. The other segments are engaged in aircraft engineering, ground services and some other airline related services. The subsidies of Air China are China National Aviation Company Limited, Air China Cargo, Air China Group Import and Export Trading Co. (AIE), Air China Shantou Industrial Development Company, Zhejiang Air Services Co. Ltd., Air China Development Corporation (Hong Kong) Limited, Beijing Golden Phoenix Human Resource Co. Ltd., Shanghai Air China Aviation Service Co. Ltd. and Total Transform Group Limited (Reuter n.d.). The company is thus exclusively engaged with the airline services. This will prove to be beneficial for the company because the customers will relate the brand name “Air China” directly with passenger transportation or air cargo services. The company relies on the philosophy of 4C, and this has helped it to develop a brand name in the international market where the customers will consider reliability or high quality service as the core competency of the company. The management of Air China said that the company took several years to build its brand name in the domestic as well as international market. They also believe that each and every employee of Air China is equally responsible for developing the brand name (Air China-d, n.d.). In future the company may diversify its business to minimise the business risk but management should ensure that the new businesses do not misuse the brand name of Air China. Among all the business conducted by the company its air transportation service succeeded in gaining an international brand name. At present it is one among the Top 500 international companies of the world. After considering the different operations in which Air China is engaged, it appears that the company is solely focusing on aviation industry and the brand name ‘Air China’ is only used to promote air passenger service and air cargo service. This is an encouraging revelation for the company because international customers will exclusively relate the corporate name as well as the brand name with the aviation services offered by the company. This attests that the company will soon gain its core competency and will emerge as an international brand. Corporate Name: The brand name plays a huge role in defining the success story of a company because the consumers use brand name for identifying the values and standards followed by the company. Companies thereby, prefer to select such names which are distinct from its competitors and convey the right message to its customers regarding products and services (Mancuso, 2009, p.130). Air China is the exclusive airlines which bears the flag of the country. The name of the company “Air China” manifests that the company has high respect for the nation to which it belongs. The Chinese ethnicity is deeply rooted in the company’s corporate culture and this is reflected in the corporate name used by the company. The company came into existence in 1988 and at present it is one of the largest aviation companies in China. Air China highly esteems the quality of services and tries hard to satisfy the customers as far as possible (Ahmed & Almarri, 2007, p.3). The brand name ‘Air China’ gives a unique identity to the company and makes it different from other local brands in China’s aviation industry. The name of the company clearly reflects the country of origin. At present, Chinese products and services are considered to be of low quality, cheap and with poor safety standards. On April 25 & 26 Air China had a brand building workshop where the management planned its strategy for enhancing its corporate branding strategy. During the workshop Boeing’s brand experts shared their exclusive idea regarding extensive brand marketing (Air China-e, 2008). http://www.airchina.com.cn/en/about_us/air_china_news/05/68215.shtml It appears that the company is quite conscious regarding its corporate image hence it selected a corporate name that clearly depicts company’s mission as well as vision. The corporate name selected by the company assist Air China to portrait itself as a symbol of loyalty as well as reliability. Conclusion: Air china is one of the Chinese companies which are in the list of Top 500 International Brands. Apart from that there are many other facts regarding Air China that makes it a true international brand. To have a better understanding of the position of the company, Air China will be evaluated considering certain specific facts. These facts will help in finding out whether the company posses the potential to be called a true international brand or not. It appears that Air China has a strong market share in its domestic or home market. In last few years the company has acquired many of its competitors. In this way Air China succeeded in gaining high market share in home country. Due to its large size operation it enjoys economies of scale and can retain cost leadership in China. The business of the company is well diversified in different part of the world. Around 60 percent of the sale is generated in domestic market whereas 40 percent revenue comes from different part of the world. Therefore it can be concluded that Air China has a well balanced geographical existence or it has a moderate balance in sales. The company offers constant service to its clients throughout the world. According to the mission statement of the company it was found that customer’s satisfaction is of vital importance for the company. Air China uses all possible means to develop a strong market image in domestic as well as in international market. In international market the products and services originated in China suffers with the negative impact of COO concept. People consider Chinese products and services as cheap and of low quality. However Air China developed several strategic collaboration with international companies in aviation industry to overcome this halo effect of “made in China”. Air China also pays proper attention toward product categories and it modifies the services as per the changing need of customers. Air China is the only airline that flies with the national flag. The name and the national flag together make a positive effect on the corporate image of the company. The customers of Air China consider the brand as a reliable one, hence the company succeeded in proper utilization of its corporate name in generating required effect on the customers. After considering the above given facts it can be concluded that Air China is an international brand in true sense. As of February 2010, the Air China fleet includes the following aircraft: Air China Fleet Aircraft Total Orders Passengers (First/Business/Economy) Notes Airbus A319-100 33 0 128 (8/120) Airbus A320-200 11 16 158 (8/150) Airbus A321-200 22 33 185 (12/173) Airbus A330-200 20 0 251 (36/215) Airbus A330-300 2 18 282 (36/246) Airbus A340-300 6 0 255 (8/28/219) Boeing 737-300 33 0 128 (8/120) Boeing 737-700 20 0 128 (8/120) Boeing 737-800 68 120 167 (8/159) Boeing 747-400 4 0 344 (10/42/292) Boeing 747-400M(combi) 6 0 280 (10/24/246) Boeing 757-200 13 0 200 (8/192) Boeing 767-300 4 0 225 (10/26/189) To be phased out from 2011 Boeing 767-300ER 1 0 230 (30/200) Boeing 777-200 10 0 314 (12/49/253) 345 (49/296) Boeing 777-300ER 0 15 TBA Boeing 787-8 0 15 TBA Total 253 149 Air China has set-up project technology branches with Beijing as the headquarter, which consist of 7 maintenance bases (in Chengdu, Chongqing, Hanzhou, Tianjin, Huhehaote, Shanghai and Guiyang), 4 affiliate enterprises, 79 domestic maintenance centers and 45 international maintenance centers. Thus Air China has established a maintenance network covering both inland and overseas. Read More