According to Vellas, (2016). International marketing refers to the business activities performance that direct the firms’ goods and services flow to users or customers in more than one country for a profit. This type of marketing is different from domestic marketing in that in international marketing, business activities take place in many countries (Economist, 2012).Whether a firm wants to directly participate in international business or indirectly, it cannot avoid the effect of the ever-increasing domestic companies number involved in exportation, importation and manufacturing overseas; the number of companies that are foreign-based operating in most markets; the expansion of areas of regional trade; the high growth of global markets; and the competitors global markets number. Of all the factors affecting international business today, five are the most dynamic and are the ones that are affecting the shape of international marketing they include: the world economies interdependence: The sudden growth of free trade areas regionally for instance EU, APEC,NAFTA and ASEAN: The wealth increase and growth in most parts of the globe, resulting to enhanced power of purchasing: The large emerging markets evolution like in China, Brazil, Malaysia, India, Hungary Russia and Poland: Advanced ways of transportation and communication because of information technology developments.
Today most activities in every firm are conducted globally in scope like technology, finance, facilities of production, research, capital and investment flows, buying and marketing and networks of distribution all have global dimensions. This report is on international marketing and brand management a case study of British Airways in UK and the entrance to the Chinese market.
British Airways, is the largest airline internationally scheduled in the United Kingdom.in addition to scheduled services, the airline is also engages in the international and domestic carriage of mail and freight operators, as well as the ancillary services (Annual Report, 2018). The flights for British Airways has over 300 destinations together with codeshare and franchise partners- carrying approximately 33 million passengers. Its earnings are over 8.67 billion sterling pounds and it also has the largest employee number in the United Kingdom with approximately 42, 377 employees. Ever since 1987, when the firm was privatized, this airline has continuously grown keeping up with the rising competition in the airlines industry over the years (British Airways, 2015).
Today, the British Airways has been successfully named as one of the pioneer airlines in adaptation of green technology and strategic decisions that are environmentally friendly. This airline was already the first to be a part of the European nation’s scheme minimizing greenhouse gas emissions. Apart from the novelty developments towards ways in which passengers fly have also gone through revolutions courtesy of the British Airways.
The British Airways has a good reputation in the industry of aviation because of its brand name especially after privatization. The name of this airline has been in the market long enough and with their reputation of good relations with the customer and punctuality. Further, the airline has a great partnership with the airlines of the United especially in the formation of a united global airline that is viewed as the third world’s biggest airline. In addition to this, this airline is the most powerful in the region of the United Kingdom in terms of their size financially and the British Airways stability (2015). Since The completion of the fifth terminal development which is promoting and improving the Heathrow airport mobility. Apart from having a highly fuel efficient fleet, British Airways has also heavily invested in technology in several areas to develop a strong technological network. British Airways began applying technology to expand its operational efficiency several years ago and the investments it made in various areas to improve the technologies being applied by the firm have started yielding benefits. This has not only positively affected sales and marketing but the firm has also invested in technology in other areas that are operational like onboarding for improvement of client experience. (British Airways, 2015). The firm is also considering to expand the digitization level in various business aspects so as to achieve higher growth. Some other key competencies include:
Their Brand image still hold a strong position in the airline market.
Acquisition of modern, top of the line aircraft fleet.
Their human resource department is highly performing.
First class services benefit from the ever-growing technological innovation
Other airlines Acquisition
The expansion of Heathrow Airport, which is bringing in a bigger slot share of the airport.
The firm has the advantage of an expanding travel market giving a chance for new destinations being discovered.
In 2019, British Airways made about 13.3 billion British pounds which is approximately16.6 billion U.S. dollars as their revenue. Considering that flying is more accessible, cheaper and faster, it has encouraged more people to fly within Europe. In 2018, European airports managed approximately 1.17 billion passengers. The German airline group (Lufthansa) was the top European airline that year. This airline was able to generate roughly 42.2 billion U.S. dollars as the revenue that year. After Lufthansa was Air France-KLM. This French airline transported passengers at a revenue of around 263.5 billion in 2019. In 2019 British Airways enjoyed a profitable growth. However, it faced various challenges at operational and strategic level including the ones created by Brexit. Brexit caused a substantial effect on airline firms in the UK but these challenges were further increased by the spread of the Coronavirus pandemic. In 2019, British Airways was 100 years old which has changed its strategic focus in the past few years of becoming a brand that is sustainable in the future. It has plans to expand its international network and is making investments in several crucial fields including technology and its staff and customer experience (Annual Report, 2018).
British Airways is among the leading UK based airline companies owned by the International Airlines Group (IAG). British Airways operated a fleet of more than 300 aircraft and operates flights to international destinations across 70 countries. The airline brand carries more than 40 million passengers each year. 2019 was a year full of challenges and opportunities for British Airways. The British Airways has been labelled as the UK’s leading consumer ‘super brand’ because of its oldest and most trusted household names which include Cadbury, Heinz and Marks & Spencer which dropped out of the favorite brands list. Being the flag carrier it has outdone over 1,500 firms to maintain its top position for the yearly ranking of trademark strength in the UK. British Airways has a strong and well-established brand with a high position in the market in the UK. Among the various factors that have accelerated the expansion of British Airways, the most significant ones are its concentration on client experience, operational efficiency, and fleet effectiveness as well as technology. As a brand in airline, it has built an image that is customer-friendly successfully by placing the biggest focus on convenience of clients (Annual Report, 2018). The parent firm of British Airways is the International Airlines Group. It is perceived as one of the most reliable brands of airline in the UK and has won several recognitions and awards for its operations that are reliable and continued focus on the experience of their customers. Brand equity that is stronger and higher trust by the client has also led to a strong competitive edge for this over its competitors.
To be the most preferred airline for long-haul premium clients: Long-haul premium customers have been the key to their profitability. They plan to use their deep understanding of the requirements necessary to be the most preferred airline to push our design product choices, network and service. They also plan to maintain a strong presence in the cargo, economy and short haul segments. This will enable them play a dire supporting role (British Airways, 2015).
To deliver an exceptional service for their customers at every touch point: Their client-facing staff have always been passionate about providing an outstanding customer service. They therefore want to build on this through a revolution in leadership, training and rewarding. Through this their customers plying all routes regardless of the classes, they will have a premium experience. They will also invest in improving services targeted to their premium customers, which include service style training. This way they will benefit all customers such as Terminal 5 and ba.com (Dreschler, 2015).
The plan to grow their existence in key worldwide cities: This will enable them provide the top global connectivity for all their clients. They will also build their presence in the top ranked global cities directly or expanding the network of airline partnerships. Whereas the well-known global cities such as London and New York will remain critical, they will emphasize on developing their position in the upcoming cities of tomorrow (British Airways, 2015).
To build on the leading position in London, since it is their home city, and also happens to be the emotional and financial heart of the business. London is the most renowned and most competitive global air market. They also have to ensure that Heathrow remains a world-class center. This is essential in giving them a strong foundation to serve the largest global long- haul markets. In support to this, they will have to look into influencing government policy decisions, and working hand in hand with the airport owners on how the infrastructure can be continually advanced (Economist, 2012).
To meet their customers’ needs and improving margins will always be a fundamental part of their business this is made possible through the new revenue streams. Nevertheless, building supplementary services that will ensure that clients are offered great value and that they have also re-enforced their brand shall be a boost to the business. They will discover new methods on how they can develop their new products and services through utilization of their assets and capabilities and at the same time ensuring that they are able to meet the needs of their essential clients and even ways in which their can enhance their client’s loyalty (Dreschler, 2015).
While the core market of British Airways is the United Kingdom, it also covers an extensive international route network. The flight operator serves more than 70 markets and carries more than 40 million passengers each year. The company is continuously optimizing its route network to offer more flights to leisure destinations. As of 2018, British Airways held 30% seat share of all the airlines departing from the London airport. It is the largest flight operator at the Heathrow and London airports as well as the second-largest at the Gatwick airport (Annual Report, 2018). BA also launched more than a dozen routes in 2018 including Nashville, Durban, Seychelles, Kefalonia, Corsica, Almeria, Marrakech, and Sheremetyevo from Heathrow, Toronto, Las Vegas, Cologne, and Lyon from Gatwick and Munich and Rome from London City. It had announced in 2018 that it will serve 34 North American locations in 2019 and have the largest route network of all the European carriers (BA annual report, 2018). BA is also continuously optimizing its route network to offer more frequent flights to popular destinations like Seattle and Nashville in the United States (British Airways, 2015).
Division of total market into number of sub-markets based on certain characteristics is known as segmentation. Various ways are used to segment the focus markets. The British Airways market segmentation can be categorized into Demographic, geographic, behavioral and psychographic.
Demographic variable: This is segmenting the market on the basis of several demographic variables which include income, gender, age, education, etc. With the aim of competing with low cost airlines, British Airways have introduced a strategy on pricing strategy to be able to attract a broader range of demographic segments (Economist, 2012).
Psychographic variables: Market segmentation is done based on customer lifestyle and attitudes. British Airways has therefore segmented its clients based on their means of travel. This can be for leisure, business or both (Vellas, 2016).The British Airways has hence ensured that there is High quality food and drink, spacious seating and friendly on board staff to ensure that their customers remain faithful.
Geographic: This is on the basis of region and density of customers. The British Airways have therefore segmented the domestic flights in UK and Europe. To achieve this more domestic and international flights have been scheduled to regions where people majorly use air transport (Lewis, 2013).
Behavioral: This form of segmentation is founded on how people use product or services, their loyalty and the kind of benefits they are looking forward to.
This is the choosing of a specific market segment by an organization for the sale of products and services. The selection of this target markets can be facilitated in relation to several patterns which may include, single- segment concentration( this is where an organization targets a single market with single product) various market segments with different products are targeted. Single-segment concentration is abided to by British Airways and offers four distinct service packages to different customer segments. The British Airways offers four levels of services which include Economy, premium economy, first class and executive which target different customer segments. British Airways aims at involving primary market of ABC1 to a segment of citizens, which was the most preferred for high class services provided by British Airways. According to (McDonald, 2013) they have also put more emphasis on attracting a more diverse set of clients, through the expansion of its short haul market.
This last step refers to the selection of marketing mix the most suitable for the target customer segment. The British Airway is unique in that it does not promote itself on the basis of having cheapest flights as other airlines do, instead it has focused on the metropolitan areas where most business owners work and reside (Economist, 2012).The British Airways has created its own brand and customers also view its services as high quality. Attractive positioning of products and services for the British Airways has led to its major success factor. With the intention of achieving long-term growth British Airways needs to effectively position its products and services (Lewis, 2013)
Studies by Grundy, (2013) indicates that China is the next biggest market in the airline industry with an annual average growth rate that is higher than the United States and it is expected that by 2030,it is expected to overtake the United States. Therefore Investors in this industry can make an entrance in a high-growth projection of the Chinese airline market by investing. In the current global economy, foreign market operations are being established in all companies regardless of the size. This sort of expansion has several advantages which include greater opportunities in the growth and diversification of markets. Based on the trend in U.K, working globally is likely to carry on. According to a survey conducted in 2016 by Wells Fargo 87% of organizations tended to believe that expanding the international market is necessary for long-term growth.
New markets: According to a conclusion made by The U.K. Small Business Administration, 96% of the consumers globally live in the exterior of the United Kingdom. In most organizations, global expansion gives them a chance to dominate new territories and reach more of their consumers and through this they are able to increase their sales (Information Week, 2013).
Diversification: Several businesses enlarge internationally in order to diversify their assets, this action also protects an organization’s bottom line from unforeseen events. For example, companies operating internationally can equalize negative growth in one of their markets by successfully operating in another one. Companies can also make use of their international markets to familiarize them with the unique products and services. This helps them maintain a positive revenue stream (Vellas, 2016).
Access to talent: An additional top benefit of working globally is the opportunity to gain access to new talent pools. In most cases, international labor offers organizations unique advantages which include increased productivity, advanced language skills and diverse educational backgrounds.
Competitive advantage: Companies prefer to expand globally in order to international expansion to advance a competitive edge over their rivals. For instance, enterprises that enlarge in markets where their opponents do not often operate, have an added advantage. This only allows them to develop a strong brand awareness with the consumers before their competitors. Expanding internationally also helps companies gain access to the new technologies and industrial environments. This may in turn improve their operations significantly. International business also increases the company’s perceived image by building their name and also recognizing the brand. This can be used to sustain future business scenarios which may include; contract negotiations, new marketing campaigns or even additional expansion (Dreschler, 2015).
Foreign investment opportunities: Companies considering to expand internationally should not forget that foreign markets can offer additional investment business opportunities. For example, most organizations are able to advance new resources and copy important connections by operating in international markets. Organizations with worldwide operations can also benefit from profitable investment opportunities that may not be available in their home country. For instance, several governments around the world offer incentives for companies willing to invest in their region (Gao & Choy, 2013).
When making the decision to enter into a new international market firms should understand that not all countries are attractive and have favorable conditions attractive for all firms. While making the decision one of the aspects to consider is the economic status of the country under consideration (Economist, 2012).Some firms come to realize that some target markets cannot afford their products and they should stop entering such markets, while other markets would readily accept a slightly different version of the product existing. This implies that firms like the British airways should know that some concepts such as ‘middle class’ have a different meaning in the developed world and in countries that are developing. For instance India has a large number of middle class people but if a UK firm is under the assumption that the spending power of a family in middle class in the UK and India is similar, it can make a big mistake if it over-invests in India.
This is what British airways considered by opting to enter China market because companies need to consider about the economic potential of a certain market before the decision to commit their resources. The firm explored the possibility of an infrastructure creation to serve a region comprising such small country markets. Apart from studying national indices for instance per capita income and gross national product, it searched more to find the number of persons who can afford to buy a ticket from this airline. According to Gao & Choy, (2013) a firm looking for a viable market should let its marketers and economists stay in that prospective market for a long time so that they can understand if there are enough potential clients with enough disposable income to buy the product the firm proposes to sell in that country. Social cultural factors: this other consideration makes it clear that countries differ from one another in terms of food eaten, language spoken, religion practiced and in many other ways. The differences are real and important and British airways considered how these differences could facilitate or hinder the marketing efforts of the airline company in the new market under consideration (Vellas, 2016).In most cases products related to people’s way of life may have to be changed significantly or will not be accepted at all, while products that are industrial may be accepted in countries even with different life practices. They may include simple changes for instance messages translation into different languages, or can creating a completely different mixes for marketing for various markets that this firm operates in.so before going for China, a thorough cultural assessment was done.
Legal and Political considerations: British airways was aware that it is important to know the host country people and government’s attitude before deciding to any commit resources. British airways historical record and its attitude towards foreign properties and investments was also considered. The firm also assessed the tax structure and other legal procedures and systems of China and other countries like turkey and china among others before settling for China and starting their operations there. In most developing countries for instance, the legal systems are not strict, and multinational corporations find it extremely difficult to implement and enforce their contracts and policies. However in such countries, there is too much government interference in the functioning of enterprises. Further despite liberalization of trade, much protectionism is given to domestic firms in various developed and developing nations across the world which is not the case with China (Economist, 2012).
Market attractiveness: British airways assessed the attractiveness of this market by evaluating the market potential based on revenues that can be produced, market access in terms of the host country being ready for investments by multinational firms like British airways, and potential competition and industry dynamics in the prospective market. Dreschler, (2015) states that a huge market with a high growth rate can be attractive and a huge upfront investment can be evidenced in such a market. In China the airline market lacked stability and competitors which made it an attractive option.
Corporation’s capability: Before a firm decides to go international it should do an audit of its capabilities and capabilities (British Airways, 2015). This firm had a clear competitive advantages in aspects of technology, market knowledge, products portfolio, reliable partners among other significant parameters.
The most convenient entry strategy to this new market is licensing as it costs a little in terms of involvement and expenses (Gao & Choy 2013).The only cost involved is signing the agreement and policing the implementation. It will offer British airways a good opportunity to begin its operations that are foreign and open the door to manufacturing relationships that are low risk. Further the firm’s capital is not tied up in foreign options and operations. However it has a criticism of limited participation form agreement length, specific product, trademark or process.
For firms to promote their products or brand in the market, they apply the marketing mix concept. The 7 Ps of marketing include product, price, place, process, promotion, physical environment and people (Groucutt& Hopkins, 2015).
British Airways will provide excellent services which will satisfy the needs and wants of buyers. The firm will provide flight tickets at prices that are reasonable and will meet all the needs of their clients. This will be done by providing fresh meals, Wi-Fi and drinks (Dreschler, 2015).
This refers to distribution of products and services from the manufacturer to the customer. British Airways will directly sell its tickets through the internet which lowers the retailers cost using technology to make the distribution channel easier (Gaggero&Piga, 2011).
British Airways will plan the prices of the products according to preferences and needs of their clients. While travelling from one place to another in economy class, clients will pay £ 100 and there are passengers who will pay £ 400 for getting more services in the business class (British Airways, 2015).
To promote their products and services British Airways has been using various promotional activities for instance public relations, direct marketing, sales promotion and advertising among others. For the sake of service promotion, this firm has set some prices on their flights like During Christmas, this firm sells tickets at prices that are reasonable and discounted as “Christmas gift vouchers”. Further it uses print and electronic media for products and services promotion. The firm will employ all these promotion strategies to ensure that their brand’s reputation in the new market is good (Dreschler, 2015).
Economist, (2012) states that success of a business depends on people because services and products are used by people. Therefore British Airways will involve its staff relations in marketing since they will be the one interacting with customers. They will therefore hire and train the right people to deliver services that are effective to customers (Shaw, 2011).
So as to reduce costs, British Airways will have a system of effective distribution and systematic steps and procedures to ensure there is smoothing working (Economist, 2012).
Since this is a service industry, it is important that the products and services offered to have a good quality and be unique. British Airways will provide the best quality and services to clients in China. The firm will provides services that effective just as it has been doing in both domestic and international flights (Dreschler, 2015).
For the entry into the China market, the total operating costs not including the fuel costs for the financial year 2020/2021 approximate value is 8.1 million British pounds. This will cater for the employees cost, landing fees and end route budget, catering fee, engineering fee and other aircraft costs, information technology costs, selling costs, currency differences costs, depreciation, impairment and amortization costs (British Airways, 2015).
After the project implementation, the project manager will follow up to see how viable and how successful the entrance to the new market is. This will involve assessing the challenges in the new market and ways of coping them and converting them to opportunities.it will also evaluating the competitors in the new market and what their strengths and weaknesses are.
Annual Report, 2018. British Airways [online available at http://www.iairgroup.com/phoenix.zhtml?c=240949&p=irol-reportsannual accessed on 18 November 2019
British Airways, 2015. British Airways Affiliate Marketing programme. [Online] Available at: http://www.britishairways.com/en-gb/information/about-ba/affiliate-programme [Accessed 24 March 2015
Dreschler (2015).Fly British Airways to Europe This Fall, Get the Hotel for Free .[online] Available at: http://www.cntraveler.com/stories/2015-04-13/fly-british-airways-to-europe-thisfall-get-the-hotel-for-free [Accessed 11 April. 2015].
Economist. (2012). In which British Airways buys a money-losing airline to the detriment of its own passengers. Retrieved January 15, 2013, from http://www.economist.com/blogs/gulliver/2012/04/ba-and-bmi
Efthymiou, M., Njoya, E.T., Lo, P.L., Papatheodorou, A. and Randall, D., 2019. The Impact of Delays on Customers' Satisfaction: an Empirical Analysis of the British Airways On-Time Performance at Heathrow Airport. Journal of Aerospace Technology and Management, 11.
Gao, Y. & Choy, N.W.K., 2019. Brand Awareness, Purchase Intention and Price Premium of International Airlines Operating between Australia and the United Kingdom. International Journal of Aviation, Aeronautics, and Aerospace, 6(3), p.10.
Grundy, M. and Moxon, R., 2013. The effectiveness of airline crisis management on brand protection: A case study of British Airways. Journal of Air Transport Management, 28, pp.55-61.
Howell, R., (2015). Market segmentation: the importance of age cohorts. The Neumann Business Review. pp.21-54
Information Week (2013). 3 Lessons From British Airways Twitter Flap - InformationWeek. [online] Available at: http://www.informationweek.com/software/social/3-lessons-from-britishairways-twitter-flap/d/d-id/1111503 [Accessed 12 April. 2015].
uela Jr. W. (2011). The impact of entry and competition on airline departure frequency. Journal Of Business & Economics Research, August 2011 9(8) pp
Vellas, F., 2016. The international marketing of travel and tourism: A strategic approach. Macmillan International Higher Education.
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