Chapter
1: The Background and
its Problem
1.0 Introduction
Internationalization
of the business nowadays apparently became a trend for the organizations to
expand their market position and gain the competitive advantage among their
contemporaries. The extent and nature of business activities are almost as
diverse and comprehensive as the totality of the social and economic interest
of a man. Various business activities acknowledged the opportunities that the
internationalization may deliver. Through their ability and capacity to expand
their business operations, internationalization is highly possible. For most of
the time, the high degree of the competition under the umbrella of an industry
and the number of competitors that are engaged in the creating the same product
and/or services or often referred as the competitors that are closely related
can cause market stiffening and will tend to saturate the resources. This idea
is one of the reasons on why the businesses are moving into foreign markets.
The
study is focused in answering the importance of local market knowledge and
demonstrating the various impacts that it can create in a certain firm. In this
paper, the organization used in the investigation is Virgin Airlines (Virgin
Atlantic Airways) which is challenging the international market. The
organization’s strength in performing in other market is assessed in different
rating which creates an idea to seek information on how effective the
organization’s approach. In general, there is a hypothesis which regards to the
idea that the success and downturns of a firm is a result in their relationship
with the market. It is not always possible to predict the future of the
business, but through the careful and thorough consideration of creating
appropriate research and analysis in the foreign market, there is a potential
for an organization to succeed. Through understanding and learning the various
factors that are hidden in the market, the international business can gain
their competitive position. The study believe that through the market
consultation, the business can create fine decisions within which in return can
influence the market because of their well-defined relationship. The local
market knowledge, however, is a basic component towards the success of the
organization and can be proved by this study
1.1 Background of the Study
There
are businesses that in the start of the operation had a great investment and
one of which is the airline industry which can perform in either local and/or
international markets. This kind of service is one of the broad classifications
of the business services. Part of the business operation should cater to
personal needs of people or with rendering of a personal service. In this
industry, the passengers or the travellers needs the efficiency in travelling
in form of safe and friendly services. One of the organizations is Virgin
Atlantic Airways that is considered as one of the leading airlines. Like the
other companies that play actively in the international market, there are
challenges and experience different changes in their operation. But unlike the
other business’s ideas, the VAA believed in the option that it is more positive
and much less risky to invest in a long-term change program to satisfy the need
to grow in the future (Blue Sky, 2009).
Apparently, the airport dominance has grown competitive in the
hospitality industry. In the accommodation of this competitive growth, the
aviation or airline industry plays an essential role in helping the economy to
survive although this type of business is a huge investment. The strategies
applied in this kind of industry can help the entire organization in finding
the dominant position (Bilotkatch, 2007). The connection of the Virgin Airline
is outrageous because of the media that serves as a huge market competency
advantage. Their strategy is using the media such as television, radio,
internet, and even newspaper gave the business an opportunity for promotion.
Virgin
Atlantic started back in 1984 with a single 747-200 and flying in route of
London to New York. Aside from the gasoline, the business was fuelled with two
ideas – to offer low price and have a better service. Passengers are the
treated as visitors and the business thought of the things to serve better
meals, offer more entertainment, create fun, and acquire smiling and
enthusiastic flight crews. For over the years, the airlines shook the industry
with the project for innovation to provide the quality of service and
entertainment. The airline is the first to offer two choices of meals, even in
economy class, and spa-services. Thus, they became the industry most favourite
in airlines and second largest long-haul carrier on the route of London to New
York (Rifkin, 2004).
1.2 Statement of the Problems
Based
on the background of the study, it is highlighted that Virgin Atlantic Airlines
(VAA) gained the expertise through the market and operational experiences that
they performed. In addition, the organization’s openness in the innovation and
technology and implementing various marketing strategies to acquire their
unique position in the market. But despite of the benefits that the VAA may
receive in performing in the competition, the local market knowledge is missing
in the marketing formula of the organization. In association to this
observation, there are three interrelated problems identified which can be the
centre of the study:
·
What is the importance of the local market
knowledge in performing even in the international settings?
·
In what ways do the local market knowledge
affects the business operations of VAA?
·
What are the key drivers of local market
knowledge in determining the success of VAA?
These
problems revolves around the local market knowledge and the business operation
of the Virgin Atlantic Airlines because of their connection in assessing the
market through determining the knowledge involves and then can be used in the
business operation of the VAA.
1.3 Research Aim and Objectives
The
main aim of the study is to investigate the importance of the local market
knowledge towards the success of the Virgin Airlines. The local market
knowledge is very broad which can definitely affect the current and even the
future performance of an organization. In order to facilitate the investigation
of the study there are objectives that needs to be considered. First is to
determine the factors that need to be considered that are related in
recognizing the components of local market knowledge. Second is to assess the
applicability of the local market knowledge in the VAA strategies and business
operations. Third is to measure the extent of applying the local market
knowledge towards the VAA business performance. And fourth is to recognize the
impact of the local market knowledge in formulating the desirable business
operations. These objectives are used as the guidelines in the study in order
to answer what was the paper needed.
1.4 Significance of the Study
The
significance of the study is not only to simply consider the importance of the
local market knowledge and its components but to apply the local market
knowledge in the business settings. It is such a challenge to consider the
application of the local market knowledge in international settings because of
the characteristics of the business, the business environment, the
diversification of markets, the involvement of changes, possibilities, and
other expectations. Local market knowledge is a basic concept that is usually
applied in the local businesses or in the small and medium enterprises. It is
also a part of the business objectives because the creation of business
mirrored the present situation of the market. However, when the local market
knowledge and concept is applied in the international setting will raise
various uncertainties, criticisms, and questions that falls particularly in the
effectiveness of the local market knowledge in contributing to their success.
Through the assessment of the study, there is an opportunity to answer these
queries and can be part of the academic context in promoting the strategic
business management and operation. In addition, the study can also serve as
another output within which the organization can use as reference in their action
in determining the local market knowledge.
1.5 Rationale
The
underpinning principle of the study is based on the concept of applying the
local knowledge in international business performance. In observing the past
literatures and reviewing the organizations that are formulating their business
strategies within the foreign market, there is a great gap identified. For
example, taking the view of international business operation of McDonalds; the
organization affects and influences the foreign markets through using their
organizational culture and operations. As a result, the foreign markets slowly
adopted the Western culture and made the company being part of their daily
activities. Although there are criticisms on how the McDonalds the change the
society, there is still a gap identified on how the McDonalds transferred the
Western culture in the international markets. With this idea bearing in mind,
the local market knowledge gained by the organization served as an initial or
primary strategy in performing in the market. In addition, the local market
knowledge appears to be visible mostly in service oriented organizations that
eventually became a part of their organizational culture. The study focused on
the Virgin Airlines that is also under the service industry believed that it
can also trace the local market knowledge and in return make it applicable in
the recent business strategy of the organization towards its competitive
advantage and success.
1.6 Research Questions
Research
questions are essential part of the research process because they facilitate
the flow of discussion and leads to the creation to the research methods and
techniques. Determining the necessary questions implies solid connection
towards the appropriate approach to achieve the goal of the study. In
recognizing the importance of market knowledge for the success of a business,
is a type of strategic approach of a firm not only for an effective market
entry but also for the desirable market performance. Being comprised by various
academic reviewed research articles and other materials, the formulated
research questions can be answered.
- What
are the factors that were needed to consider that are related in
recognizing the components of local market knowledge?
- What
is the assurance for success of applying the local market knowledge in the
VAA strategies and business operations?
- What
is the extent of applying the local market knowledge towards the VAA
business performance?
- What
is the impact of the local market knowledge in formulating the desirable
business operations?
1.7 Structure of Related Chapters
This
study is divided into five chapters in order to provide clarity and coherence
on determining the importance of local market knowledge towards the success of
a business. The first part of the dissertation will be discussing the problem
uncovered by the researcher and provide ample background of the topic. The
chapter shall constitute an introduction to the whole dissertation, and the
statement of the problem in order to present the basis of the study. Moreover,
the chapter shall also have a discussion on the scope of its study as well as
the significance of the study to society in general.
The
second chapter shall be discussing the relevance of the study in the existing
literature. It shall provide studies on the Virgin Atlantic Airlines (VAA) and
the industry it belonged to and the importance in gaining the local market
knowledge. This section of literature
will demonstrate the SWOT analysis of VAA and as well as the key to their success
factors and practices to gain the market competitiveness. This will also
include the concept of the local market knowledge and its theories and
principles. After the presentation of the review on literature, the researcher
shall provide a synthesis of the whole chapter to highlight the important areas
in relation to the study.
The
third part of the study will discuss the methods and procedures applied in the
study. This chapter includes the presentation of techniques appropriate for
data collection and research design. In addition, it will discuss the
statistical treatment meant for analysis and the limitations that the method
might encounter.
The
fourth chapter is the section where the data results are analysed and
interpreted according to what the approach taken. It is expected that the
discussion of the data results can answer the research questions and make the
study achieve its aim. However, the unexpected results is also appreciated
which can lead for the further research.
The
last chapter shall comprise of three sections, the summary of the findings, the
recommendations and conclusion. With these three portions, the chapter enable
to address the problem stated in the initial chapters of the study and give
justification if the problems are answered or need further study.
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