Components of a Successful Global Business Model

Question:

Discuss about the Global Strategies Of Business Organizations.

The components of a business model are value proposition, market participation, value chain infrastructure and management model. In today’s era of globalization, business organizations must in international market. Expanding globally can help business reduce cost, improve revenue and profitability, gain a huge customer base and take leverage of the modern technology that makes the world a global village.  The Companies which are highly successful on global markets might have to bear substantial loss initially. Therefore it is of paramount importance for business to innovate the components of its business model. The strategies of global market which can be good for one organization might not be good enough for another organization .Business organizations should focus on innovation, global branding, and management model and on its supply chain management to succeed in the global market (Gamble and Thompson 2014). 

While selecting the target markets, business organizations should measure the attractiveness of the market. There are four prime factors which a business organization must consider for target market selection. These factors are i) Size of the market and rate of growth of the market ii) Institutional Context of a particular country iii) Competitive environment of a region and iv) A markets cultural, administrative, economic and geographic (CAGE) distance from the other markets an organization serves. There are three stages of modes of entry which are passive response, initial overt entry and established international operation. The entry strategies adopted by a country can be exporting, licensing, joint venture, franchising and foreign direct investment (McGrath 2013). 

The Companies chosen for analysis of Target markets and mode of entry are from the food and beverage industry and airline industry. Starbucks and Virgin Airlines will be analyzed in this section of the report.

Target markets of Starbucks

Starbucks is an American global leading coffee chain which has its headquarters in Seattle, Washington. The organization is a very successful brand globally and has presence in around sixty two countries with more than 20,000 stores. Global expansion drives the growth rate of the leading café chain and the organization had plans to open 500 new stores in China. Though Starbucks faced huge losses in Australia in the year 2008 and the coffee chain faced stiff competition from local cafes like Gloria Jeans and Coffee Club in Australia, still the country has been highly successful and widely accepted by customers in China and Australia.  The market share of Starbucks in home country the United States is around 33 percent. Starbucks opened its first international store of coffee in Tokyo in the year 1996. While selecting the target markets, Starbucks earn the respect and trust of global customers and the culture and tradition of the host country is valued widely while selecting target market (Teeratansirikool et al 2013).

Target Market Selection Factors

The target market of Starbucks is well defined.  Majority of customers of Starbucks are located in upscale suburban areas and cities. In Australia, Starbucks target tourists visiting Australia more than local customers and are located inside shopping malls and major tourist spots in cities like Sydney and Melbourne. In 1995, Starbucks entered in Japan with a Joint Venture between Starbucks International and Sazaby League. Seattle Coffee Company was also acquired by Starbucks in the United Kingdom, Starbucks operate in the Middle East with a licensing agreement with M.H. Alshaya Co. In China and Taiwan Starbucks has partnered with H&Q Asia (Rothaermel 2015). 

The adults in the age group of 25 to 40 are the major target audience of Starbucks and this adult population is responsible for around 49 percent of business of Starbucks. The growth rate of this target market has been demonstrated to be around 3 percent and the target markets of Starbucks globally are customers with high disposable income and who have focus on the social welfare. In the global markets Starbucks also target young adults in the age bracket of 18 to 24 years who account for around 40 percentage of the population. This young group of population in different countries is an attractive target market segment for Starbucks because young adults are can meet in the café, have fun, write term papers. This target market segment has a growth rate of 4. 6 percent and Starbucks can gain a huge customer base in this target market through digital platforms like Facebook, Twitter and Instagram which enable the café to stay connected with the youth. The target audience of Starbucks also includes teenagers and kids. These customers in the age bracket of 13 to 17 years also account for 2 percent of the sales of Starbucks. Starbucks also target consumers who like to experience drinking delicious coffee at home by selling whole bean coffees and merchandise (Madsen and Walker 2015).

Starbucks Café had joint venture with Dreyer’s Grand Ice Cream in 1995, had a strategic alliance with United Airlines in the year 1995, Starbucks has also given license to Aramark to operate in industrial sites, universities and colleges in the United States, Starbucks had a licensing agreement with Kraft Food. Licensing and partnership is the main mode of entry for Starbucks and the Company licenses with local company of the host country who has technical knowledge, Starbucks also entered in Joint Venture with some stores, for example, in South Korea Starbucks café have a joint venture with Korea Co. , Ltd. Switzerland AG has a joint venture with Starbucks in Switzerland. In India Starbucks has partnership with Future Group and PVR cinemas (starbucks.in/ 2017).

Target Market of Qatar Airways

Modes of Entry Strategies

Qatar Airways is headquartered in Doha and operates via hub and spoke model in 150 international countries in North and South America, Europe, Central and South Asia and Africa. In the year 2009, Qatar Airways started its operation in Australia and Melbourne. In the year 2016, the Qatar Airways had plan for expansion in China and developed a new European hub at Luxembourg Airport. Qatar Airways has expansion plan in South America. The target market of Qatar airways are global customers across the globe with high income who would like to enjoy premium quality services like good food and comfortable seats and are willing to pay hundreds of dollars for a flight ticket. These customers generally book business class tickets with the airline. Qatar Airways also offer economy class tickets for customers who want an affordable flying experience. The major competitor of Qatar Airways is Emirates and the Company targets customers who find Emirates expensive. The target market expansion of the airlines in 2017 will be 26 new destinations across the globe like Brazil, Thailand, San Francisco and many more. The cargo carrier of the airline delivers freight across 150 key business destinations across the globe (qatarairways.com/us/en, 2017).

Qatar Airways mode of entry in international markets is Joint Venture and partnership. For instance, India with more than 1.2 billion population is an important international market for Qatar Airways and the airline has entered into a partnership with Vistara which is a joint venture of Tata Sons Ltd and Singapore Airlines. Qatar Airways has membership with oneworld global alliance which was named the best by transport rating organization Skytrax (Johnson et al 2013).

The components of value proposition are product leadership, customer intimacy and Operational excellence.

The Gloria Jean’s Coffees is headquartered in New South Wales, Australia. The café operates in 39 countries across the globe with more than 1000 coffee houses. The Australian premium brand of café has build global value proposition for customers by offering a wide range of coffee and hand-crafted snacks for its global customers. The global coffee chain achieves operational excellence by operating in a franchise mode in most of the global countries across the globe. The value proposition for product leadership is achieved by the café beans and capsules, hot drinks, cold drinks and different merchandise like grinders; coffee mugs are available for customers in the coffee stores. The global value proposition is achieved by Gloria Jean’s café as the leading coffee chain has collaborated with Rainforest Alliance and certification by Rainforest Alliance has helped Gloria Jean’s coffees to achieve operational excellence by developing a supply chain for procurement of best cocoa and coffee.  The global value proposition of Gloria Jean’s Coffees focuses on creating value for its stakeholders by investing in sustainability efforts and corporate social responsibility for the members of the community.  The Café continuously innovate its business process to serve global customers delightfully. The tagline of Gloria Jean’s Changing Life One Sip at a time and With Heart campaigns focus on CSR responsibilities of the café and thus indirectly the Company enhances Customer Perceived Value. The coffee stores of Gloria Jean’s are a perfect place for relaxation and rejuvenation for customers who can enjoy an amazing ambience with a sip of gourmet coffee (gloriajeans.com 2017).

Case study: Starbucks – Successful Global Brand

Virgin Airways (Airline Industry)

Virgin airways operate as Virgin Atlantic, Virgin Australia and Virgin America. The Virgin airways develop a global value proposition by innovation of its business process continuously to provide excellent in-flight experience and delightful experience for its customers at the airport. The value proposition for global customers include delightful experience offered by members of cabin crew like ground staffs of the airlines helps customers to check-in using self-check in kiosks. The airlines provide comfortable lounge services for customers at the airport. A special menu is offered to business class customers of Virgin Airways. There are tangible components like comfortable seats with extra leg space, in-flight entertainment system. The airlines achieve operational excellence by ensuring safety to customers and maintaining punctuality during flight operation. Virgin Australia serve 52 destinations across the globe, Virgin Atlantic serves 29 destinations and Virgin America serves around 24 destinations. The product leadership is obtained by the brand under the visionary leadership of co-founder Richard Branson with youngest fleets in the sky from Boeing and Airbus aircrafts which have huge capacity and are equipped with modern technology. The values of the culture of a country are incorporated and feedbacks from customers are taken regularly to achieve operational excellence and develop a global value proposition (virginaustralia.com/au/en/ 2017).

Conclusion

It can be concluded that global expansion can be beneficial for business in multiple ways. However there are potential risks of entering in a global market. The target market should be carefully selected by a business organization in the global market and organizations should focus on innovation of its business model to sustain in the global market. Few business organizations can enter all markets open to them. However business organizations must measure the attractiveness of the target market before entering the market. Time and substantial resources are required for organizations to develop into a reputed global organization.

 Gamble, J.E. and Thompson Jr, A.A., 2014. Essentials of strategic management. Irwin Mcgraw-Hill.

gloriajeans.com/. 2017. Food and Beverage Industry. [online] Available at: https://www.gloriajeans.com/ [Accessed 4 Oct. 2017].  

Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regnér, P., 2013. Exploring strategy text & cases (Vol. 10). Pearson.

Madsen, T.L. and Walker, G., 2015. Modern competitive strategy. McGraw Hill.

McGrath, R.G., 2013. The end of competitive advantage: How to keep your strategy moving as fast as your business. Harvard Business Review Press.

 qatarairways.com/us/en. 2017. Airline Industry. [online] Available at: https://www.qatarairways.com/us/en/homepage.page [Accessed 4 Oct. 2017].

Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

starbucks.in/. 2017. Food and Beverage Industry. [online] Available at: https://www.starbucks.in/ [Accessed 4 Oct. 2017].

Teeratansirikool, L., Siengthai, S., Badir, Y. and Charoenngam, C., 2013. Competitive strategies and firm performance: the mediating role of performance measurement. International Journal of Productivity and Performance Management, 62(2), pp.168-184.

virginaustralia.com/au/en/. 2017. Airline Industry. [online] Available at: https://www.virginaustralia.com/au/en/ [Accessed 4 Oct. 2017].