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Flying Start at Virgin Blue Essay

Case Study: Flying Start at Virgin Blue

Introduction

            The world of business today is dynamic and people have continued to venture into various types of businesses within and outside their countries (Kirpalani, 1990).  Doing business overseas has in many ways proved quite challenging for many since this involves change in terms of culture and the business environment.  International business involves the buying or selling of goods and services between two or more countries.  With the advent of globalization, there is a rapid movement of people across national borders worldwide and this rapid movement in turn has brought a boom time for many firms.  The globalization has brought about the need for communication in different languages, increased need for travel to foreign countries, multiple currency usage, and coping with diverse societies, politics, regulatory environments, cultures and customs.  This paper will analyze flying start at Virgin Blue determining factors that lead to business success, importance of local market knowledge and operational experience that lead to the achievement of success and benefits that accrue from mergers.

What Factors Would Determine Whether Virgin Express Could Have Succeeded In Europe If Rayanair Or Easyjet Had Gone Out Of Business?

            There are various factors that can be able

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to establish whether Virgin Express could have succeeded in Europe if Rayanair or Eastjet had gone out of business. The factors can be classified as under political, economic and socio-cultural factors.  Knowledge of Europe’s culture by the management of Virgin express is an important factor as this would be able to determine its success. Geert Hofstede notes that culture mostly causes conflict rather than synergy and even goes further to state that the differences in culture if at best could cause a nuisance but mostly, it causes disasters (Hofstede, 2001).

            If at all Virgin express have basic ideas as concerns the culture that exist in Europe, risks such as low sales, employee turnover, low profitability and so forth will be avoided.  These risks can well be mitigated through effective communication and respect for people hence reducing cultural diversity.  Another factor concerns the political and business climate of Europe, which should be stable in order for Virgin Express to succeed in business.  A stable political as well as business environment is vital for any new business or company in a foreign country (Backman & Butler, 2003).

The other factor concerns knowledge of the comparative advantage of Europe in terms of its labor force, investment opportunities, latest advances in investment opportunities, latest advances in technology and the level of the intellectual capital that exists in Europe.  This also includes geographical advantages, cultural proximity, language skills, and the infrastructure.  The aspect of competitive advantage establishes an expansion in business once it has been built and the degree of creating this competitive advantage varies a lot.  The potential size of the market needs to be large enough and it also needs a competitive advantage which is strong and hard so that a successful extension is established.

Cost advantage is also another factor that would establish the success of Virgin Express in Europe and this needs an increase in sales and output by a business firm.  In order to become successful in Europe, this needs to be achieved.  Another factor relates to the economic growth of Belgium.  The economic growth of Belgium is an important factor that is bound to establish when the business of Virgin Express succeeds.  If there is an upswing in the business cycle, business is bound to earn large profits.  This eventually leads to the growth of a business.

Another factor relates to the knowledge of local, regional and national markets.  This is essential in that it reduces cultural diversity and eases entry into the foreign market since the management knows very well the behaviour of the community especially the consumer behaviour, tastes and preferences among the consumers hence they will be able to assess the demand in the local markets, prices, cost structure and income elasticities for the consumers as well as the budget constraints of individuals as regards their current income.

Knowledge of the behaviour of the competitor in Europe is also a factor that would determine whether Virgin Express could have succeeded in Europe if Rayanair or Easyjet had gone out of business.  This is essential as it will assist Virgin Express to find out what really drove them out of business.  This is also because firms are mostly influenced by their competitor’s behaviour especially in those markets whereby there exists high risk and uncertainty.  This is also an important signal for making decisions that concern gaining entry into a new business environment or a new market.  This will also enable them to gain earlier entry if at all the other firms were making huge profits so as to be able to get the same amount of profits.

The institutional environment that exists in Europe is another factor that would have determined the success of Virgin Express had Easyjet or Raynair gone out of business.  The institutional environment consists the determination of risk conditions that Europe has as relates inadequate legal, regulatory as well as political framework. If the institutional environment contain a lot of deficiencies, Virgin Express would not have succeeded in establishing its business in Europe since entry into the market would be deterred.

How Important Is Local Market Knowledge And Operational Experience In Achieving Success?

            There are various obstacles that are mostly faced by firms when they decide to establish businesses away from their own home markets.  Such obstacles include high degree of uncertainty which often disrupts the process of effective decision making; experiencing difficulties when it comes to dealing with local partners as well as the local government that exists in that country; challenges in the adaptation of processes and products required for various national and cultural requirements.  The other challenges include cultures and languages, business practices and tastes that the local population has.  These obstacles have in most cases resulted into making costly errors by foreign firms, experience delays as they attempt to set up their businesses abroad.  In extreme cases, these leads to poor performance and in certain circumstances may result into withdrawal by these firms.

            All these problems arise because of the firms’ lack of knowledge concerning the available local markets in the new host country, which is the knowledge about a country’s culture, society, politics, economy and language.  The knowledge about existing local markets is essential especially for successful implementation as well as planning of the means of gaining successful entry into a foreign country.  However, some form of local knowledge can only be gained through partnerships established among various firms in order to achieve success once they enter into the new host country (Dahles, & Muijzenberg 2003).

            There are various levels of the knowledge of the local market that make it necessary for firms to enter into a new host country in order to establish effective and successful businesses.  This knowledge could be objective or explicit information on a number of issues such as macroeconomic statistics, demographic data or codified research market.  This local market knowledge at the same time could be based on experientially forms which are essential in the navigation across various political regimes, cultures and socioeconomic systems.  However, the explicit forms of knowledge of the local markets may also prove quite difficult because in some countries, sources that relate to knowledge of the market information may not be available which also need to be established by credible private and public sources.  Acquisition of the local market information is vital as it enables the understanding of local culture, language and politics in a foreign country.

Cultural knowledge is essential especially in understanding of how it impacts a firms marketing and human resource management.  Knowledge about the existing local markets may also be termed as organizational learning.  Learning organization as a concept implies that a successful organization should adapt and learn ways in which to respond to changes in the environment and the growth.  The idea of learning organization implies that there exists some learning in organizations different from the learning attained by different individuals.

            However, the process of organizational learning especially concerning firms in a new country is often not a smooth process since at times getting this knowledge from people may prove to be quite stressful especially when they refuse to cooperate.  This in turn has made organizational learning to become such a complex process which is different among different firms and this is mainly because of the changes in flows that concern knowledge of the local market.

            The various changes are mostly due to the nature that is in part in the knowledge itself and the different organizational structures of the firm.  On the other hand, operational experience is also important in achieving success while establishing a new business in a new country.  In international markets, operational experience acts to curb transactional uncertainty and ethnocentricity.  It also results in the acceptance of any foreign intermediaries and partners through control sharing.

            In addition, operational experience helps in the installation of confidence in different firms that will enable them to assess the various returns and risks in the firm as well as managing various foreign operations in these firms.  Operational experience also helps in the behaviour of the foreign firms when other firms attempt to gain foreign market entry especially their culture (Johnson & Turner, 2003).

  In the case scenario of flying start at Virgin Blue, the Carrie managed to establish a successful business in Australia because of the effective team management and the knowledge of the Australian local market and this has enabled it to obtain almost half of the Australia’s market.  However, the company could not gain an effective market entry in Belgium because extensive research concerning the Belgium market was not conducted hence its collapse.

What benefits could accrue from merging Virgin Express with SN Brussels?

There are a number of benefits that arise from mergers and this could prove quite useful for Virgin Express if it decides to merge with SN Brussels.  Mergers are helpful in reduction of competition between firms.  In addition, mergers also improve productivity of the firm since ideas are shared as well as expertise.  This is also essential for the development of shareholder value as well as competitive advantage. Mergers are beneficial as they enable a firm to gain easy entry into new geographic markets (Hitt, Harrison & Ireland, 2001).

            By gaining easy entry into new geographic markets, Virgin Express will be able to adapt well into the new business environment hence adapting to change.  Mergers also enhance increased market share of firms and this leads to making of huge profits by these firms eventually establishing a strong hold on the local market (Erramilli, 1991).

   Improved utilization of infrastructure or assets is also as a result of mergers.  There is less wastage of resources and existing human capital as a result of merging two or more firms (Carrow & Holbreche, 2001).

  This will also be beneficial to Virgin Express if at all it decides to merge with SN Brussels.  Through merging, Virgin Express will also be in a position to gain additional technology as well as intellectual property with SN Brussels.  This is vital in the improvement of efficiency and productivity in Virgin Express as well as SN Brussels.

            Business performance is also bound to increase as Virgin Express will be in a position to gain control in the management of SN Brussels and this also applies to the diversification of Virgin Express’s business interests.  By emerging with SN Brussels, Virgin Express will have an opportunity to effectively exploit the various opportunities and advantages that exist in Belgium hence increasing its value, attaining a succession pool as well as getting talent and competence which is specific (Kay, 1995).

           Mergers enable promotion of interests in the market especially the consumer interest.  As a result, the company is able to enhance its productivity and growth.  This also includes cost reduction, new products and techniques and competitors who are new in the market.  The other benefit that concern mergers is the impact it has on employees who most of the times are well informed.  This is essential since the employees’ confidence is increased and as a result, satisfaction and performance by employees is well maintained (Snyder, 1997).

 This also applies to Virgin Express decision of merging with SN Brussels of which the two companies will be able to maintain their productivity and customer satisfaction through the high performance that is put up by the employees.  However, mergers could on the other hand result into conflicts in organizations because of the change that might be instilled (Legare, 1998).

            These changes apply to those of management, direction as well as other policies of the organization.  Every human organization is subject to change and these changes can be enhanced dramatically and purposefully (Stroh & Neale, 2002).On the other hand, organizational climate has its impact on the organization’s behaviour and how it operates.  Organizations evolve through periods of change and among the common changes experienced today are technology, organizational strategy and human resources (Nahavandi & Malekzadeh, 1993).

            These changes are bound to occur when Virgin Express and SN Brussels merge and this will result into resistance to change by the employees and managers of these two organizations.  This is because they perceive change differently.  Employees resist change because of uncertainty.  For example, when a change is about to be implemented, employees become nervous and anxious.  They persistently worry about their job security, or simply whether they are capable of achieving the new job demands (Groppelli, 2000). In addition, a change initiated might hamper the self interests of some managers in an organization eventually affecting their influence or power.  As a result, these managers will tend to fight the change initiated.  Another reason why these employees may resist to change is the fear of disrupting social networks in which most organizational work arrangements are based on.  They fear that these changes could adversely affect these relationships.  They might also fight change with the aim of protecting their security, power, self confidence, status and familiarities with the existing procedures (Harris & Robert, 2000).

            It is essential for managers of both flight companies to know how to overcome employees’ resistance to change.  There are various ways of handling resistance to change.   One way is through participation.  In this way those employees who participate in the organizations planning and change implementation are at an advantageous position that will enable them understand the reasons that will enable them understand the reasons for change.  Education employees on the need for the impending change are also another factor as this will help reduce their resistance to change.  Others include announcing changes in advance and allowing employees to adjust to change can also help in reducing resistance to change (Nelson & Quick, 2006)

Having Achieved Success In Australia, What Factors Might Determine Whether Branson Is Successful In The USA?

            Having achieved success in Australia, there are various factors that could well determine whether Branson is successful in the USA.  The major factor is the efficiency that exists in the management team at the Branson Company.  It is assumed that having achieved success in Australia, the same will apply to USA.  The other factor that might determine whether Branson will be successful in the USA relates to the knowledge of the local market that exists in United States.  Its competitive advantage, level of technology, language and culture, infrastructure is also important (Cohen & Eimicke, 2002).

 The other factors concern how the consumers in United States rate the costs of the Virgin USA and how frequently they make use of facility.

Conclusion

Today’s businesses have become more international as companies have been trying to establish overseas business.  This therefore calls for understanding of the business cultures found in these countries since this is essential for setting up a successful business.

Bibliography
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Carrow, V. & Holbreche, L. (2001) Reaping the benefits of mergers and acquisitions: In search of the golden fleece.  Elsevier.

Cohen, S. & Eimicke, W. (2002) The effective public manager:  Achieving success in a changing government. San Francisco, Jossey-Bass. Available from Questia database: http://www.questia.com/PM.qst?a=o&d=106912766.[Accessed  12 August  2007].

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Hitt, M.,  Harrison, J.  & Ireland, R.  (2001) Mergers and acquisitions:  A guide to creating value for stakeholders. New York: Oxford University Press. Available  from Questia database: http://www.questia.com/PM.qst?a=o&d=106499472 [Accessed 12 August 2007].

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Legare, T. L. (1998). The Human Side of Mergers and Acquisitions: Understanding and Managing Human Resource Integration Issues. Human resource planning, 21(1), 32+. Available  , from Questia database: http://www.questia.com/PM.qst?a=o&d=5001349767. [Accessed 12 August 2007].

Nahavandi, A. & Malekzadeh, A.  (1993) Organizational culture in the management of mergers. Westport, CT: Quorum Books. Available  from Questia database: http://www.questia.com/PM.qst?a=o&d=27225611.  [Accessed 12 August 2007].

Nelson, D. & Quick, C. (2006) Organizational behaviour: foundations, realities and challenges.  Thomson South –Western. ISBN 0324224702.

Stroh, K. & Neale, N. (2002) Organizational behaviour: A management challenge, Lawrence Erlbaum Associates. ISBN 0805840559.

Snyder, D. (1997) Mergers and Acquisitions in the European Community and the United States: A Movement toward a Uniform Enforcement Body?. Law and Policy in International Business, 29(1), 115-144. Available from  Questia database: http://www.questia.com/PM.qst?a=o&d=5001525037.  [Accessed 12 August 2007].

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