International Business

Executive Summary:

One of the major challenges faced by strategic planners in multinational organizations is to identify and assess different types of risks involved in the rapidly growing and changing global markets. The diverse and dynamic global environment includes a myriad of risks that need to be identified, and assessed to ensure survival and success. Management of risks embedded in the global business environment is a critical part of strategic planning and management process. "Failure to correctly identify and assess risks may result in market blunders, policy disasters, and or organizational crisis. It is essential for success to identify, assess and adapt their strategies to the environment'' (Stoffels, 1982).

Managing an international business is different from managing a domestic business for at least four reasons: (i) countries are different, (ii) the range of problems confronted by a manager in an international business is wider and the problems themselves more complex than those confronted by a manager in a domestic business, (iii) managers in an international business must find ways to work within the limits imposed by governments' intervention in the international trade and investment system, and (iv) international transactions involve converting money into different currencies.

The factors determining involvement in world trade include licensing, exporting, franchising, contract manufacturing, joint ventures and strategic alliances, foreign subsidiaries, and direct foreign investment.

THE ISSUES DETERMINING VIRGIN EXPRESS'S SUCCESSION IN EUROPE:

The factors that would determine whether virgin Express could have succeeded in Europe if Ryanair or Easyjet had gone out of businesses are: sociocultural forces, economic and financial forces, legal and regulatory forces, and physical and environmental forces. Other than these factors, competing in time and getting access to the required routes and infrastructure play a crucial role in achieving success in Europe by Virgin Express.

SYNOPSIS:

Virgin Express team got involved in World trade through direct foreign investment by buying up the Belgian leisure airline Euro Belgian Airlines and later rebranding it into Virgin Express. Virgin Express was a low-cost airline based at Brussels airport. They began in 1996 when the Virgin Group acquired a 90% stake in EBA Express.

Contrary to the practice of many other budget airlines, Virgin Express offered the possibility to book seats online, seats with additional legroom and the opportunity to connect between flights.

easyJet is a low cost airline officially known as easyJet Airline Company Limited, based at London Luton Airport. It is one of the largest low-fare airlines in Europe, operating domestic and international scheduled services on 307 routes between 80 European cities.The company holds a United Kingdom Civil Aviation Authority Type A Operating Licence permitting it to carry passengers, cargo and mail on aircraft.

Ryanair is an Irish airline headquartered in Dublin, with its biggest operational base situated in London Stansted Airport in the UK. It is Europe's largest low-cost carrier and it is one of the world's largest and most successful airlines in terms of profits, number of flights, number of passengers flown. Ryanair operates at one count -on 460 routes to 25 countries. Ryanair has been characterised by rapid expansion, a result of the deregulation of the air industry in Europe in 1997. Over the years, it has evolved into one of the world's most profitable airlines, running at remarkable margins by passing its costs directly to its customers. Ryanair is the largest airline in Europe in terms of passenger numbers.

Sociocultural Forces:

To get involved in global trade it's critical to be aware of the cultural differences among nations. Ð''Different nations have different ways of conducting business, and unfortunately American businesspeople are notoriously bad at adopting. Infact American businesspeople have consistently been accused of ethnocentricity, which is an attitude that one's own culture is superior to all others'(Nickels/McHugh; Understanding Business). So keeping in mind this context the Virgin Express team must begin their operations in Europe.

For example: Coca-Cola and Pepsi are major competitors throughout the world as well as in the United States. When it comes to Japan, Coke is the clear winner. When trying to sell in a different country, it is fundamentally important to adapt as much as possible to the local culture. Coca-Cola did that by setting up in-house social clubs like those in other Japanese firms. It also helped employess buy home with low-interest loans. Every effort was made to adjust to the tastes of the local people, including the creation of a 50 percent juice drink. Relationship marketing is especially important in japan , where negotiations take time and patience is a virtue. Pepsi, on the other hand remains a minor competitor due to its failure to invest the time necessary to establish local partners and relationships.

Economic and financial forces:

Economic risk is viewed as Ð''arising from economic mismanagement of the resources by the government of the country' (Hill, 2000). Deresky defines it as `a country's ability or intention to meet its financial obligations '(Deresky, 2000). Macroeconomic policy variables have been generally recognized as sources for economic risks. Policy decisions triggering sustained inflation, catastrophic changes in foreign exchange rates, depletion of foreign exchange reserves or skyrocketing national debt of a country can be sources of economic risk. They can directly or indirectly affect the viability and value of an enterprise. The debt and currency crisis in Mexico in the eighties, the global currency crisis of the nineties and the steady decline in the value of the Euro now are examples of economic risks that can significantly impact on the multinationals in the global markets. "Economic risk can manifest itself in the form of economic controls such as tariff and non-tariff barriers that can be tools for economic discrimination or preferential treatments" (Czinkota & Dichtl, 1996).

Legal and regulatory forces:

In global markets, no central system of law exists, so several groups of laws and regulations may apply. To be successful in European market, it's important for Virgin team to contact local businesspeople in the host countries and gain their cooperation and sponsorship. Such local contacts can help