Paper Example on Global Markets: A Case of the Aviation Industry

The expansion of business operations from a local to a global market is called globalization. Enterprises usually grow intending to expand into the global market to get access to a wide talent pool, access to raw materials, and wide customers for their commodities. Before any business expands into the global market, market research enables the company to identify available opportunities and threats existing in the target market. This essay will evaluate the opportunities and threats that exist as companies seek to expand to the global business environment using the aviation industry as the case study

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Opportunities Faced By Aviation Companies Seeking To Expand Into Global Markets

The fast growth of the tourism sector is an opportunity for the aviation industry to seek to move to the global market (Stalnaker et al., 2016). An excellent example of a worldwide tourist destination that has attracted many people in the city of Dubai in the United Arab Emirates. The influx of the number of people planning to fly to Dubai gives the aviation industry a vast pool of customer base that supports new flight routes (Stalnaker, Usman & Taylor, 2016). Furthermore, countries like South Korea, Japan, Greece, and China have stepped up to promote cultural tourism in their regions. Thus, many people from Europe and the United States are flying to these regions to explore the Asia culture, leading to growth in the air travel market.

The rapidly growing technology is another opportunity that enables the aviation industry to move to the global market. The introduction of technologies such as remote air traffic controllers, ATC reduces the operating costs of the aviation industry since one remote-ATC has the potential of monitoring several airports. Remote air traffic control, ATC is the technology that is gaining traction in countries like Norway (International Transporters Association, 2015). Such technologies reduce the charges imposed at the airports on planes that land, hence maximizing profit margins. There is also a lot of research going on at the moment that seeks to develop planes that will only require one pilot. If such innovation becomes a success, many aviation companies will cut costs of hiring two pilots.

Another opportunity that faces the aviation industry is the opening up of the market in developing regions of the world. Some of the developing areas of the world like Asia, Africa, and the Middle East have an untapped market of customers seeking to use low-cost carriers (Kiraci, 2020). As a result, many aviation companies are striving to schedule flights to these untapped markets. In addition to that, the developing nations usually give the aviation industry access to a pool of talented employees who are cheaper to maintain. Some countries like China produce the best engineers in the manufacturing sector. Hence, the aviation industry’s globalization has also enabled plane manufacturing companies to tap into these cheap labor forces (Kiraci, 2020). For instance, Airbus uses airplane parts manufactured in China to assemble their planes. Hence, aviation companies that harness these opportunities well usually end up reaping the maximum profit. An increase in the gross per capita GDP among the citizens of developing nations enables people to consider going for a vacation on another continent, thus increasing the global market of the aviation industry.

The development of air transport in Eastern Europe and intra-continental travel within the European Union is another opportunity that is growing the global aviation industry. Many aviation companies have increased flights to these regions due to global market growth. Furthermore, the sudden change in the shopping trends gives the aviation industry opportunities to expand. For instance, the growth of technology enables many people to shop from any part of the world using platforms like Alibaba, eBay, and Amazon. As a result, the aviation industry has been able to tap into these opportunities by increasing cargo flights that transport products from one part of the world to places where customers are located.

Threats Faced by Aviation Companies Seeking to Expand into Global Markets

One of the challenges facing the globalization of the aviation industry is political upheaval (Stalnaker et al., 2016). For instance, the United Kingdom’s move to implement a Brexit agreement will have adverse negative effects on flight operations within the European Union region. Passenger and cargo planes flying from other regions of Europe to the United Kingdom will have to pay an extra fee to use Britain’s airspace. Consequently, aviation companies will have to incur higher operating costs, which might lead to losses. Additionally, British aviation companies saw a drastic drop in the prices of their shares in the stock exchange market due to Brexit. Many aviation companies ended up refunding their customers’ money due to canceled flights in war-torn countries such as Libya – thus incurring a lot of losses.

The fluctuation of the global oil market is another factor that impacts the aviation industry negatively. Most aviation companies have had to deal with an increase in oil prices, which ultimately affects their profit margins (Stalnaker et al., 2016). The trade war between countries like China and the United States usually leads to losses due to sanctions placed on goods manufactured in China. Due to the entry of other aviation companies into the market, customer losses are another threat that faces existing air travel companies operating on the global market. Nonetheless, the entry of electric trains in developed countries is another player that is giving the aviation industry stiff competition. All these factors, combined with passengers’ safety as a result of plane crashes, are the most significant risks that face the globalization of the aviation industry.

Lastly, another unforeseen threat that manifested recently is the global medical pandemic resulting from the widespread of COVID-19 (Liu et al., 2020). Although medical pandemics are ignored when considering factors that could affect globalization – their effect has more devastating results than any other threat. Most countries across the world had to close their airspace to minimize the disease spread. As a result, the aviation industry ended up refunding and compensating its customers for the inconvenience caused. Consequently, aviation industries are now dealing with massive job losses and surging profits (Liu et al., 2020). Some aviation companies are considering closing down their operations since they are enabled to recover from the loss.

Conclusion

The globalization of the aviation industry leads to a growth in the profit margins as companies strive to tap into the existing market. The opportunities that lead to the globalization of the aviation industry include the emerging growth of the economy of developing nations, the growth of technology, and the tourism industry. These opportunities rapidly increase the profit margins of aviation companies because of the availability of customers. Furthermore, a change in shopping trends usually allows cargo planes to transport goods to different parts of the world. However, globalization of the aviation industry usually faces threats like political upheaval, countries' trade wars, medical pandemics, civil wars, and competition from other aviation companies.

Therefore, companies must develop strategies to expand into the global market while minimizing the risks that emerge from these threats. One of the best strategies is for aviation companies to hire planes instead of purchasing new ones from the aerospace industry. Such a move will minimize losses in cases where operations completely stop due to crises like the COVID-19 pandemic. All in all, globalization is the best strategy for maximizing profits using minimizing operating costs.

References

International Transporters Association. (2015, September 11). Challenges and opportunities in aviation. Retrieved July 14, 2020, from https://www.itfglobal.org/en/focus/automation/challenges-and-opportunities-in-aviation

Kiraci, K. (2020). The Factors Determining the Profitability of Low-Cost Airlines.

Liu, Y., Lee, J. M., & Lee, C. (2020). The challenges and opportunities of a global health crisis: the management and business implications of COVID-19 from an Asian perspective. Asian Business & Management, 19, 277-297. https://doi.org/10.1057/s41291-020-00119-x

Stalnaker, T., Usman, K., & Taylor, A. (2016). Airline economic analysis. Oliver Wyman, 1-68.