Consumer behaviour impacts on airline product distribution

This Research Paper on Consumer behaviour trends and their impacts on airline product distribution will help in writing Marketing Dissertation Topic

KEY COMPETITIVE THEMES FOR THE FUTURE

Technology evolution over several decades has resulted in a distribution landscape that is increasingly fragmented and replete with new opportunity. Airlines can no longer rely on a static approach to inventory distribution or traditional revenue as a conduit to economic vitality – rather they must adopt a dynamic approach that leverages technology appropriately and supports a return to true one-to-one marketing (Peppers and Rogers, 1994) between airlines and their customers.

To do this effectively, airlines will need to devise a plan that is often evolutionary but also sometimes revolutionary in nature. Focusing on five key themes, airlines will positively transform the effectiveness of their distribution and revenue optimisation strategy to compete given the new reality of the info-consumer.

Mix it up!

In today’s multi-channel distribution environment, the majority of airlines offer content to their customers through a variety of channels. Given the nature of the info-consumer’s desire for immediate access to information through a variety of communication vehicles, there is compelling evidence that the multi-channel trend will continue to gain importance. Tomorrow’s distribution reality will be a greater emphasis on multi-channel mix. This will be more pronounced years from now when travel shoppers and buyers will receive tailored, dynamic and experiential content – increasing spontaneity in travel buying. Airlines will have to master use of emerging technologies and evaluate multiple ways to communicate with customers while also considering the true costs and benefits of each channel.

Moreover, they will do this whereas customers continue to gain in their ability to seek out travel information from a variety of sources. With numerous factors to evaluate, it is obvious that no one-distribution mix will meet the needs of all airlines. Guided by the anticipated results of each airline’s target customer strategy, the right channel mix will be influential in reaching the airline’s most profitable consumers without ignoring larger, less-profitable segments that keep the airline’s brand relevant in the marketplace and keep airplanes full. The concept of ‘trip type’ helps an airline segment booking types both by their number of occurrences and their contribution to an airline’s bottom line. When travelling, the info-consumer will not be defined by one label or type of travel. Instead, the info-consumer will travel at different times for different reasons – for the week, a business trip; for the weekend, a quick getaway. This channel jumping trend can already be seen today as highlighted by historical air travel purchase data outlined in Figure 1, based on a 2007 global distribution study by Sabre Holdings. These bookings come from different sources depending on the trip type. For example, in the scenario in Figure 1, about 70 per cent of bookings for cost-conscious leisure trips are made through a direct channel whereas about 90 per cent of managed corporate bookings are made using an indirect channel. The length of each bar is relevant to the size of the segment that purchases the type of trip.

Get intimate!

The ability for an airline to truly understand its customers – who they are, what they want and how to best reach them in a dynamic, interactive sense – will become increasingly important. Info-consumers have access to endless amounts of information in printed publications and through the media, but especially via the internet. This enhanced knowledge plays a crucial role in the decisions they make when planning a trip. Consumers might at times be overwhelmed with too much information, ironically leading them to recruit the help of a travel agent. This will likely be experiential in nature, using advanced technology to address tailored information with destination expertise. This provides another opportunity for airlines to  get to know their customers and offer options for those requiring a little more help making decisions than those who view themselves as independent consumers.

In either case, info-consumers need to be viewed as unique individuals with specific needs, which help determine the decisions they make about the trips they purchase. Most importantly, the info-consumer wants to know that airlines understand their desires. This individuality drives the need to identify new and creative ways to reach travellers without compromising products, services or price.

Leveraging customer data

For an airline to simply know who its info consumers  are – based on what is collected today through loyalty programmes – will be largely insufficient down line. Expanding the information collected and thus the intimacy of the relationship will result in creating innovative travel choices that will satisfy the customer’s desire for more tailored travel options. To do this successfully will require more indepth knowledge of what travellers want as they travel upstream and downstream in the price spectrum. In addition, a good understanding of the unique attributes of the travel experience desired will be required. As discussed  earlier, the trap here is recognising that the same info-consumers may appear in various segment types and be inconsistent in the types of trips they select or in how they pay attention to brand. These consumers want to create personally branded options from start to finish for every trip, and they want to do it quickly.

One possible solution to this dilemma is through enhanced, automated search capabilities or data mining. Data mining may become the equivalent of today’s comprehensive contact lists enhanced with advanced customer relationship management tools that could facilitate more innovative marketing practices.

The increase in savvy info-consumers who want to travel ‘their way’ coupled with the emergence of new markets will compel travel suppliers to collect comprehensive customer data from all points of sale as well as employ analytical tools to interpret that information. Getting the right product to the right customer at the right time for the right price will not only be a preferred goal of marketers but a necessity for success. Mechanisms critical to understanding not only the customer value but the customer network value enables airlines of all sizes to market appropriately to the info-consumer. With this information, airlines will more effectively sell and cross sell to their targeted audience, offer consistent service, drive loyalty and leverage customer feedback in the development of new and desired products.

Disclaimer-This research paper written by Gordon Locke and taken from Journal of Revenue and Pricing Management Vol. 8, 2/3, 267–278 is property of Palgrave Macmillan and should be used for academic reference purpose only.

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Liquidity and Arbitrage in the Market for Credit Risk

This Research Paper on Liquidity and Arbitrage in the Market for Credit Risk will help in your Finance Dissertation Topic

The recent credit crisis has highlighted the importance of market liquidity and its interaction with the price of credit risk. We investigate this interaction by relating the liquidity of corporate bonds to the basis between the credit default swap (CDS) spread of the issuer and the par-equivalent bond yield spread. The liquidity of a bond is measured using a recently developed measure called latent liquidity, which is defined as the weighted average turnover of funds holding the bond, where the weights are their fractional holdings of the bond. We find that bonds with higher latent liquidity are more expensive relative to their CDS contracts after controlling for other realized measures of liquidity. Analysis of interaction effects shows that highly illiquid bonds of firms with a greater degree of uncertainty are also expensive, consistent with limits to arbitrage between CDS and bond markets, due to the higher costs of “shorting” illiquid bonds. Additionally, we document the positive effects of liquidity in the CDS market on the CDS-bond basis. We also find that several firm- and bond-level variables related to credit risk affect the basis, indicating that the CDS spread does not fully capture the credit risk of the bond.

 Introduction

Corporate bonds are among the least understood instruments in the U.S. financial markets. This is surprising given the sheer size of the U.S. corporate  bond market, about $6.8 trillion outstanding as of June 2009, which makes such

bonds an important source of capital for U.S. firms.1 These bonds carry a risk of default, and hence command a yield premium or spread relative to their risk free counterparts. However, the academic literature in finance has been unable to explain a significant component of corporate bond yields/prices in relation to their Treasury counterparts, despite using a range of structural and reduced-form credit risk models.

Prior studies have noted that although default risk is an important determinant of the yield spread, other factors such as liquidity, taxes, and aggregate market risk variables (other than credit risk) may also play a significant role in

determining the spread. Of these other factors, it has been conjectured that liquidity effects play an important role in the pricing of corporate bonds, and are reflected in the non default component of their yields (i.e., the portion of the corporate bond yield that cannot be explained by factors related to default risk). Since illiquid instruments are difficult to trade, investors holding them demand a risk premium that is related to the level of liquidity in the instrument. In the context of corporate bonds, this premium increases the expected return of the bond in a way that is not directly related to the credit risk embedded in the instrument. In other words, a premium for liquidity can be thought of as a non default-related component of the yield spread.

Unfortunately, the non default component of corporate bond yields has been inadequately studied, largely due to the paucity of data. In particular, the absence of frequent trades in corporate bonds makes it difficult to compute trade-based measures of liquidity relying on quoted/traded prices or yields to measure liquidity, as has been done in the equity markets. It is difficult, therefore, to measure the liquidity of corporate bonds directly. Consequently, it is a challenge to directly study the impact of liquidity on corporate bond yields and prices, thus leaving the

discussion of corporate bond spreads somewhat incomplete. An important development during this decade has been the credit default swap (CDS) market, which has emerged as the barometer of the market’s collective judgment of the credit risk of the bonds issued by an obligor. The CDS contract is a derivative in which the underlying instruments are corporate bonds.

Financial theory tells us that a strong economic relationship should exist between the CDS and its underlying instruments. The CDS spread is thus a proxy for the premium attached to credit risk, which, in a world without frictions, would be exactly equivalent to the credit risk in the underlying corporate bonds. In practice,

however, it may itself be affected by market frictions, as discussed later on in the paper.   In this paper, we study the CDS-bond basis, the difference between the  CDS spread of the issuer and the par-equivalent CDS spread of the bond, as a (somewhat imperfect) measure of the non default component of the bond yield. 

We relate the CDS-bond basis to bond liquidity and other variables such as the bond characteristics, firm-level credit risk effects, and liquidity in the CDS market itself. We make several significant contributions in this study.

First, we use and further validate a new measure of bond liquidity, called latent liquidity, proposed by Mahanti, Nashikkar, Subrahmanyam, Chacko, and Mallik (2008), which is based on the holdings of bonds by investors, and thus does not require a large number of observed trades for its computation. This measure weights the turnover of the funds that own the bond by their fractional holdings; thus, it is a measure of the accessibility of a bond to market participants. The attractive feature of this measure is that it circumvents the problem of non availability

of transaction data for corporate bonds and yet provides a reasonable proxy for liquidity. We show that our measure has explanatory power for the liquidity component of the CDS-bond basis, even after controlling for trading volume and other bond characteristics such as age, coupon, and issue size, which have been associated with bond liquidity.

Second, we show that even after controlling for credit risk using the price of the CDS contract, corporate bond prices are still affected by factors related to the default risk in the firm. We also find that the effect is one-sided: When firms are riskier, their corporate bonds tend to be relatively expensive. Furthermore, it is the illiquid bonds of firms with more uncertainty that are more expensive relative to their CDS contracts. Our interpretation is that this conclusion is due to the effects of frictions in the arbitrage mechanism. Agents participating in the CDS market and the corporate bond market may have different valuations for the credit risk of the obligor. However, arbitrageurs who try to profit from this difference may find it difficult to sell corporate bonds short because of limited supply in the borrowing and lending markets for corporate bonds. Thus, illiquid corporate bonds of firms with greater uncertainty are more likely to be expensive relative to their CDS contracts.

Third, we show that the liquidity of the CDS contract itself influences both the liquidity of the bond and the bond price itself. Bonds of issuers whose CDS contracts enjoy greater liquidity tend to be more expensive (have lower yields) in the cross section compared with their less liquid counterparts after adjusting for various bond characteristics. This is evidence of liquidity spillover effects from the CDS market to the corporate bond market.

Fourth, we demonstrate the effect of individual bond characteristics, such as the presence or absence of covenants and differences in tax status, on bond prices.

To our knowledge, this is the first paper that studies the effect of bond covenants on bond valuation, using the CDS spread as a control for credit risk. The novel bond-liquidity measure that we use in this paper is related to the theory proposed by Amihud and Mendelson (1986) according to which, in equilibrium, assets with the lowest transaction costs are held by investors with the shortest trading horizon, and have higher prices. Our metric, proposed by  Mahanti et al. (2008), can thus be thought of as a direct measure of the activity of funds holding a particular bond. It is also related to the literature on liquidity and asset prices, most notably Vayanos andWang (2007), who use a search-based model to provide for an endogenous concentration of liquidity in particular assets.

This concentration leads to active investors participating in these assets, thus lowering transaction costs and leading to higher prices at the same time. In this sense, our measure can be thought of as directly measuring the extent of search frictions when the marginal holders of a particular bond wish to trade.

Disclaimer- This research paper "Liquidity and Arbitrage in the Market for Credit Risk" is written by Amrut Nashikkar, Marti G. Subrahmanyam, and Sriketan Mahanti and taken from JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS Vol. 46, No. 3, June 2011, pp. 627–656- COPYRIGHT 2011, MICHAEL G. FOSTER SCHOOL OF BUSINESS, UNIVERSITY OF WASHINGTON, SEATTLE, WA 98195 doi:10.1017/S002210901100007X. 

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MRF Limited SWOT Analysis Tyres Industry India

 

MRF Limited SWOT Analysis-Project Report on Tyres Industry in India

A business analysis of MRF Ltd., a company engaged in manufacture and distribution of tires, is provided, focusing on its strengths, weaknesses, opportunities for improvement and threats to the company. Strengths include benefits derived from its strong market position. Weaknesses include its involvement in price fixing allegations. Opportunities for improvement include growth in automotive manufacturing industry in India. Threats to the company include intense competition from rivals.

Strengths

Strong brand recognition

MRF maintains strong brand recognition in the tyre industry in India. For instance, it has received

many awards in the recent past. According to a study by the industry experts, MRF ranked highest

among the new-vehicle owners who are highly satisfied with their original equipment tyre brands. It

ranked highest among original equipment tyre brands with an overall score of 810 and performed

particularly well in all four factors that drive satisfaction for a second consecutive year. The study,

now in its 11th year, measures satisfaction among original equipment tyre owners during the first

12 to 24 months of ownership. The study measures overall satisfaction by examining four factors

including appearance, durability, traction/handling and ride.

Therefore, strong brand recognition allows the company to enter new markets with ease and also

enables it to launch new products. In addition, it also provides competitive advantage to the company

over its peers and helps in attracting new customers.

Vertically integrated operations

  

The company is vertically integrated its operations in terms of its core business. MRF is primarily

engaged in the manufacture and sale of rubber products. The company derives majority of its

revenues from its core business i.e. tyres, the rest comes from its presence in toys. It manufactures

tyres for all kinds of vehicle including two-wheelers, light commercial vehicles, passenger cars, heavy

duty trucks and buses and off-road industrial vehicles. Recently, the company also started

manufacturing tyres for aerospace and defense markets.

Further, MRF offers a range of services to its customers, ranging from helping them pick the tyre of

their choice to helping them maintain their vehicle. For example, the company provides one stop

shop for all types of tyres through MRF T&S franchises.The company currently operates more than

200 T&S shop across India. Through MRF Tyredrome, the company offers computerized wheel

alignment, wheel balancing, tyre changing, nitrogen filling, robotic car wash, optical headlamp

aligning, rim straightening and tubeless tyre repair. In addition, through MRF Institute of Driver

Development (MIDD), the company provides training to drive light and heavy commercial vehicle

(LCV & HCV). MRF has trained over 2,000 LCV and 700 HCV drivers. MRF also provides tyre

maintenance services.

Thus, vertically integrated operations provide MRF with significant advantages over less integrated

competitors and position the company to optimally serve its customers. Additionally, it enables the

company to constantly increase capacities and maintain market leadership and profitability in most

segments.

Weaknesses

Lock outs due to labor issues impact the sales

MRF has been suffering from labor issues in its facilities fro the past few years. For instance, in

2011, the company's manufacturing facility in Kottayam in Kerala was forced for a lockout for about

two days due to labor unrest in the factory. Consequently, MRF’s tyre production was severely hit.

Due to this, it reported a decline of 6.2% in its net profit for the second quarter ended March 31,

2011. Hence, such instances in the future could impact the production of tyres which could have a

direct influence on the company's revenues.

Involvement in price fixing allegations impacts the company's reputation

MRF is alleged to participate in price fixing and price hike allegations in 2011. During the year, the

Competition Commission of India (CCI) investigated the possibility of cartelization in the Indian tyre

industry based on a report submitted by its Director General earlier in the year. According to the

investigation, it is concluded that five leading Indian tyre makers including Apollo Tyres, MRF, JK

Tyre and Industries, Birla Tyres and CEAT along with Automotive Tyre Manufacturers' Association

(Atma) had acted in concert, violating section 3 of the Competition Act that deals with cartelization.

However, in October 2012, CCI acquitted all the five tyre companies, including MRF, of cartelization

charges.

Disclaimer-This SWOT Analysis Report should be used for academic purpose only and Copyright of MRF Limited SWOT Analysis is the property of MarketLine, a Datamonitor business.

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Canara Bank Commerical Banking Project Report

Project Report on Canara Bank- Commerical Banking Industry Topic

SWOT Analysis of Canara Bank

 Strengths

 ■ Boasts an unbroken record of profits since its inception.

■ Comfortable capital adequacy ratio.

■ Expanded its branch and ATM network during the 2012 fiscal year.

■ Recently consolidated its business position by rebalancing its assets and liabilities.

Weaknesses

 ■ Potential for political interference.

■ Limited presence in western India.

■ High levels of non-performing assets.

Opportunities

 ■ Drive to increase its overseas presence.

■ The bank may expand into Western markets.

■ The bank has been one of the fastest to increase infrastructure lending in recent years, ahead of its rivals.

■ Net worth of the bank increased during 2012.

Threats

■ Continued global economic downturn.

Company Overview Canara Bank, based in Bangalore, is India's 11th largest bank in terms of market

capitalisation. It was founded in 1906 and nationalised in 1969. It has nine subsidiaries, sponsored institutions and joint ventures in India and abroad. The bank has over 4,000 branches and more than 2,000 ATMs (during the 2012 fiscal year, the bank opened 343 new branches and 642 ATMs). Of these branches, 2,681 have internet and mobile banking services and 2,091 offer 'Anywhere Banking' services. All of its branches offer real-time gross settlement and national electronic funds transfer facilities. As of the end of June 2012, Canara Bank occupied a premier position in the Indian banking sector and boasts an unbroken record of profits since its inception. Canara recorded total staff of 43,397 as of the end of March 2011.

Our core view on the Indian economy sees a cyclical upturn in the coming years, with full-year real GDP growth projected to rebound to 5.5% this fiscal year (FY2013/14 [April-March]) from an estimated growth rate of 5.0% in FY2012/13 (see 'Cyclical Bounce Capped By Lingering Twin Deficits', April 5). Having said that, given the uncertain environment on the back of the continued presence of the country's lingering twin deficits - high current account and budgetary shortfalls - we believe that any rebound in growth is likely to be muted, without the historical vigour witnessed in previous recoveries. In this article, we look at indicators of banking sector activity, and what they suggest about the nature of India's impending growth bounce. With regards to our projections for the banking sector's prospects this year, we are forecasting total asset growth to rebound to 20.0% this year, from the slowdown to 13.2% growth in 2012.

Despite our sanguine outlook, we are not expecting a particularly forceful recovery in economic growth in the coming fiscal year. To be sure, our FY2013/14 real GDP growth forecast of 6.1% would be well below the 10-year trend growth rate of 8.0%. While a weaker external climate goes some way to explain this, we believe that the government's persistent fiscal failings are perhaps the largest impediment to stronger growth. New Delhi's failure to rein in the fiscal deficit has been a major reason behind India's struggles with stubborn inflation, historically high interest rates and a record current account shortfall. These factors have, in turn, exhausted investor patience with India's growth story.

In a worst case scenario, in which the government fails to make any progress on deficit reduction in the coming months, there is a possibility that India will lose its coveted investment grade status. Indeed, Fitch Ratings and Standard & Poor's, two of the 'Big Three' agencies, have already sounded out warnings on this front. A downgrade to junk would knock any nascent investment rebound off track, and potentially see Indian real GDP growth languish in the low-to-mid-single-digits for an extended period.

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Ranbaxy Laboratories Limited SWOT Analysis-Pharmaceuticals Industry

Ranbaxy Laboratories Limited SWOT Analysis-Pharmaceuticals Industry Dissertation Writing Help

 Strengths

Strong commercial infrastructure in emerging markets driving hybrid business growth Daiichi Sankyo, the parent company of Ranbaxy, derives advantage from Ranbaxy's significant presence in emerging pharmaceutical markets in Asia, Africa and East Europe. In the recent years, Ranbaxy introduced several Daiichi Sankyo's innovative products in some markets, starting with India. For instance, in 2009, Ranbaxy began marketing Daiichi Sankyo's Olmesartan (Olvance) in India. In addition, both the companies have formed partnerships in Romania, Mexico and Africa. In December 2011, Daiichi Sankyo and Ranbaxy undertook a synergistic initiative in Malaysia, where Ranbaxy marketed innovative products originally discovered by Daiichi Sankyo.

Ranbaxy is among the very few global generic companies offering a basket of both generic and innovator medicines. The hybrid business model with Daiichi Sankyo has made progress with collaborations on the front-end in Romania, Germany, Venezuela and Thailand in the recent years. Further, under an agreement with Daiichi Sankyo, Ranbaxy launched an authorized generic of Evoxac in the US market during FY2012.

Growing global pharmaceutical business imparting revenue stability

Ranbaxy's growing global pharmaceutical business adds up to the financial growth of the company.

During FY2012, the pharmaceutical segment recorded revenues of INR124,597.3 million (approximately $2,317.5 million), an increase of 20.6% over FY2011. The company’s generic atorvastatin contributed substantially to the US revenues. Ranbaxy achieved a market share of over 50% during the exclusivity period and continued to lead, post exclusivity. Further, in FY2012, growth in Western Europe was aided by the launch of atorvastatin in the region and had secured a significant market share of atorvastatin in Germany, Italy, Sweden, the Netherlands and France.

In August 2012, Ranbaxy Pharmaceuticals Inc. (RPI), a wholly-owned subsidiary of Ranbaxy launched authorized generic pioglitazone hydrochloride tablets in the US market, under an agreement with Takeda Pharmaceuticals U.S.A., Inc. This was a significant addition to the company’s existing portfolio of anti-diabetic products in the US market. The branded segment, which is the one of the company’s propellers in the US pharmaceuticals market, launched Absorica (Isotretinoin) capsules under a licensing agreement with Cipher Pharmaceuticals Inc.

Later in October 2012, RPI launched the authorized generic cevimeline hydrochloride 30 mg. capsules in the US market, under an agreement with Daiichi Sankyo. In addition, in April 2012, Ranbaxy launched India's first new drug Synriam for the treatment of uncomplicated Plasmodium falciparum malaria in adults.

Ranbaxy commenced the US launch of three First-To-File (FTF) products during 2009, Sumatriptan, Valacyclovir and Oxcarbazepine Suspension. In Europe, the company launched six new products. In addition, a new Dosage Forms facility was set up in the Special Economic Zone, at Mohali (Punjab, India). The new commercial facility has a capacity of 2 billion tablets and 500 million capsules per annum. This facility would cater to the developed markets of the US and the EU. Also in April 2012,  Ranbaxy commenced exports of Atorvastatin Calcium Oral Tablets to the US market from its Mohali SEZ manufacturing facility. The company has also invested in its manufacturing facilities at Ohm Laboratories, the US, to significantly enhance manufacturing capacities in 2010. Thus, the strong growth witnessed in the pharmaceutical business imparts financial stability to the company and strengthens its hold in the market.

Focus in diverse therapeutic and geographic areas providing competitive advantage

Ranbaxy focuses in a wide range of therapeutic areas, which insulates its business from concentration

risk and provides it with competitive advantage. The company offers active pharmaceuticals ingredients (API) and intermediate, generics, drug discovery and consumer health care products. The company's products are divided into two general areas: dosage forms and API. The company offers therapeutics for orthopedics, pain management, and gastrointestinal, cardiovascular and central nervous system disorders. In addition, Ranbaxy offers nutritionals, multivitamins and dermatologicals. Its API division offers about 50 products covering a wide therapeutic range such as cardiovasculars, anti-infectives, anti-ulcerants, anti-diabetics, anti-depressants, anti-virals and others.

Ranbaxy generates revenues from diverse markets across the globe. The company has strong presence in both developed and emerging markets. It has a significant presence in 23 of the top 25 pharmaceutical markets of the world. Ranbaxy serves its customers in over 125 countries and has  an expanding international portfolio of affiliates, joint ventures and alliances, ground operations in 43 countries and manufacturing operations in eight countries. During FY2012, Ranbaxy derived 18.7% of its total revenues from India, its domestic market, 43.2% from North America, 16.8% from the European market, 6.3% from Africa, 6.7% from Asia Pacific other than India and the remaining from other regions. Strong presence in geographically diverse markets shields Ranbaxy from risks associated with adverse economic and political developments in a particular geographic region.

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UK Food Drink Industry Marketing Topic

United Kingdom UK Food and Drink Industry - Marketing Dissertation Writing Help

Industry Forecast of Food and Drink Industry in UK

Global Industry Overview

The first quarter of 2013 was largely a good one for the global food and drink industry. Improving sentiment across parts of the developed world, particularly the United States, as well as in crucial growth markets such as China, contributed to a promising run-up in the share prices of many of the world's leading food and drink companies. 

The highlight of the quarter was undoubtedly the announcement in February 2013 that Warren Buffett and his Berkshire Hathaway investment fund had teamed up with Brazil-based private equity firm 3G Capital to strike a US$28bn deal to buy US food company Heinz. Once the regulatory hurdles are cleared, the deal is likely to be the fourth largest food and drink acquisition of all time. 

The quarter's events continued to reinforce the Food & Drink team's core near- and long-term views. One of the most widely discussed issues has been food safety, with concerns about horsemeat in the European supply chain, high levels of antibiotics in meat supplied to fast-food restaurant KFC in China, and possibly poor-quality infant formula supplied to the Chinese market all having a marked effect on spending. The run-up in commodity prices on the back of the US's worst drought in about 50 years was among the most important themes seen over the second half of 2012; however, the prices of key grains have stabilised since Q412. That said, they remain historically quite elevated.

Consumer Outlook

Although we expect a positive full-year out-turn - with a 1.1% real GDP growth forecast currently penciled in - we warn that recovery is both fragile and patchy with considerable headwinds in the form of severe demand destruction in the periphery of the eurozone, which could clobber UK trade and investment. The economy is recovering, but with fiscal cuts looming and unemployment stubbornly high, the rate of growth will be fairly tepid.

Beyond this year, we expect a further pickup in activity to underpin a 1.4% growth rate in 2014 and 2.0% in 2015. Combined household deleveraging and the government's ambitious fiscal squeeze have left the export sector and fixed capital investment as the only viable engines of growth.

The key factor for the UK economy is the health of the UK consumer, which contributes three-quarters of national spending. Therefore, we believe that the state of household deleveraging will provide significant clues as to the magnitude and direction of economic growth going forward. Households have been net borrowers for the best part of a decade. However, mortgagors have been able to rely on rapid growth in property prices during the last economic cycle, which have increased equity values and made it relatively easy to service loans. With property prices now falling and interest costs still exceeding nominal income growth, households have been forced to save more.

Credit data certainly reflect the constraints facing the household sector. Spending is further affected by the deleveraging pressure facing the household sector, with extremely low interest rates and general economic uncertainty motivating many borrowers to pay down mortgages. Housing equity withdrawal, which had surged during the credit boom as borrowers funded spending by releasing equity, remains deeply negative as households focus on paying off debts.

Although we believe that high leverage in the banking sector does not necessarily present an imminent risk, we are concerned with the anaemic pace of deleveraging among households, which are the driving force of the economy. With nominal income growth unlikely to pick up substantially and household indebtedness still high, the Bank of England will be unable to raise interest rates for many years to come. In the meantime consumer spending, and by extension economic growth, will continue to suffer.

More Positive Over Longer Term

 We hold a more upbeat outlook over the longer term and expect private consumption growth to outperform the eurozone out to 2017. The UK is supported by the competitive nature of its economy, with independent monetary and exchange rate policies and an early commitment to major fiscal reforms. We believe this fiscal commitment puts the country in a stronger position to benefit from an upturn in growth than some of its other European neighbours such as France and Germany. Additionally, the UK consumer is one of the most enthusiastic in Western Europe, and the food and drink industry stands to benefit more strongly than others from the eventual rebound in regional growth.

Risks To Outlook

There are significant downside risks to our economic growth forecasts, particularly stemming from the impact of fiscal consolidation and the eurozone sovereign debt crisis.

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Qantas Emirates strategic Alliance in Airways Case Studies

Dissertation Writing Help on Qantas Airways and Emirates-Strategic Alliance-Mergers and Acquistions in Airline Industry

 The article discusses the strategic alliance between airline companies Qantas Airways Ltd. and Emirates to increase their network coverage. The alliance aims to enhance Qantas' competitive positioning, maintaining its market dominance within Australia and enhancing its global branding. The airlines combine operations and aspects of marketing as part of a major restructuring being undertaken by Qantas. A Swot analysis of Qantas is also provided.

Introduction

 

On 31st March 2013, two Airbus 380s flew over Sydney Harbour to mark the beginning of the QANTAS Emirates alliance  whereby the two airlines combine  operations  and aspects of marketing as  part of a major restructuring being undertaken by QANTAS.

Qantas is an Austrialian icon. Think QANTAS, think flying kangaroo, 'I Still Call Australia Home', think the Sydney Harbour Bridge and Uluru, the Twelve Apostles, the Great Barrier Reef. QANTAS has its origins in 1920 when it began operating as Queensland and Northern Territory Aerial Services Limited. QANTAS pioneered the ‘Kangaroo Route’ to London via Singapore in 1947, which became the main way Australians would travel to Europe. It is Australia’s leading domestic and international air carrier.

 

 

QANTAS’ Transformation Plan

 

QANTAS is undergoing a period of significant transformation in the face of a growing and changing global market. Growth in Asia is seeing rising demand from emerging middle classes, as well as significant growth in competitors. Global forces are posing challenges for QANTAS with the impacts of a strong Australian dollar and high oil prices. Globalisation is subsequently having a profound impact upon QANTAS’ competitive situation, creating the need for rethinking marketing management and operations strategy, to ensure success in the future, especially in terms of the ‘long haul’ component of its business. This involves strategies to shore up QANTAS’ competitive positioning and turn a loss making international business into a powerful global aviation company with a significant competitive advantage.

 

QANTAS has adopted a range of extensive and at times controversial strategies to ensure that the company remains relevant and cost effective in the aviation market for the long haul….. QANTAS announced a five year transformation plan in 2011, with the strategic goal of becoming ‘one of the world’s best premium airlines, setting global standards for long haul travel while delivering attractive returns to shareholders’. This includes a major restructuring of its business announced in June 2012, involving separating the management of the domestic and international arms of the company, significant job cuts, global outsourcing, efficiency measures and cost reductions, and the broadening of strategic alliances.

 

The primary strategic goal for QANTAS international is long-term shareholder value. The strategy is operations and marketing focused with financial goals the ultimate aim; and implications for finance and human resources. The strategy targets four pillars identified by management:

 

Pillar 1: Focus on the Customer Experience

Pillar 2: Strengthen Asia with regards to flight frequency and Asian destination routes

Pillar 3: Deepen and broaden alliances to target global gateways

Pillar 4: Ongoing business improvement incorporating disciplined financial management

 

Strategic Alliances

 

A strategic alliance is an agreement between two independently owned businesses, to join forces to achieve specific goals, involving the alignment of specified services or activities, in order to take advantage of economies of scale to the mutual benefit of each business.

 

Types of Strategic Alliance:

 

An equity strategic alliance, involving partial ownership of equity in another business.

 

A non equity strategic alliance, involving an agreement to cooperate in activities such as operations and marketing

A joint venture, involving combining the assets of the partner firms in an independent project

 

Generally an alliance should create reduction in costs and improved customer service, leading to greater profitability for the businesses involved. Alliances often result from a crisis faced by one or more of the parties.

 

QANTAS Emirates Alliance

 

QANTAS is involved in alliances and partnerships with a number of other businesses. For example, QANTAS was a founding member of the One World Alliance of 12 major airlines, one of the biggest global aviation alliances, in 1999. That alliance gives customers access to a much broader range of air travel options, frequent flyer rewards and benefits than a single airline could deliver. The QANTAS Emirates Alliance is the latest and biggest such agreement entered into by QANTAS. It is a non-equity strategic alliance which centres on combining forces to increase the network coverage of both airlines, e.g. customers who fly with QANTAS are now able to fly to an increased number of destinations such as in the Middle East and North Africa. Other benefits to QANTAS customers will include greater flight frequency, i.e. flights leaving more often; access to more airport lounges; expanded loyalty programs and an enhanced customer experience. The QANTAS Emirates Alliance seeks to enhance QANTAS’ competitive positioning, maintaining its market dominance within Australia and enhancing its global branding in the international aviation market.

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Features of the Commercial agreement signed 6/9/2012 by Alan Joyce (QANTAS) and Tim Clarke (Emirates) to create this alliance include:

•  10 year partnership (five years only approved by the ACCC)
•  Aim to provide the world’s best airline service, including integrated network with coordinated sales, pricing, scheduling and benefit sharing, increased flight frequency and access to airport lounges, loyalty programs and excellent customer service
•  QANTAS European flight hub moved from Singapore to Dubai
•  Match key customer benefits across airlines; where there is a difference in customer benefit, the higher benefit will becomes the standard across both airlines
•  Airbus 380 daily service to London will travel via Dubai Terminal
•  Increased choice of flights to Europe via the QANTAS Emirates codeshare agreement, so a passenger might book through QANTAS, and fly Sydney or Melbourne to Dubai with QANTAS, and Dubai to London or other European destinations with Emirates
•  Will create the world’s largest combined A380 fleet
•  QANTAS Frequent Flyer members will be able to earn and redeem frequent flyer points/skywards miles across the airlines, thus expanding frequent flyer benefit
•  Shared baggage policy will see the baggage allowance raised from 20kg to 30kg for QANTAS passengers (except to the Americas)
• QANTAS to introduce ‘Dubai connect’, giving customers hotel accommodation, meals, transfers for flights with stopovers of between six and 24 hours for First and Business class, and between eight and 24 hours for Economy and Premium Economy class.
•  Chauffeur hire car service for First and Business class
•  14 daily QANTAS operated or coded flights to Dubai from Adelaide, Brisbane, Melbourne, Perth, Sydney; only two stops for regional travelers to Europe (e.g. from Port Macquarie to Madrid).

 

Why Emirates?

 

There are a number of reasons for QANTAS to choose Emirates as an alliance partner:

 

• One of the best airlines in the world with a reputation as a quality aviation service provider

 

• All wide-body fleet

 

• Broad international network coverage which complements QANTAS’ presence in the Americas, South Africa, Asia and domestic/regional areas

 

• Dubai to replace Singapore as QANTAS’ hub for Europe, allowing a restructuring of the Asia network

 

• Asia no longer just part of the ‘Kangaroo Route’, but a source and destination, e.g. increase ‘dedicated capacity’ to Singapore, change times of flights to Singapore and Hong Kong to facilitate an increase

in ‘same day’ connections throughout Asia; Emirates have an extensive Asian network already

 

• Will complement relationships with other airlines such as American Airlines, and the Oneworld Alliance American Airlines, LAN, South African Airways and China Eastern

 

• Withdrawal of QANTAS from Frankfurt services, which have been underperforming, will be helped by this alliance which will help QANTAS to continue to service this area via Emirates.

 

Prospects For QANTAS

 

QANTAS’ domestic business is performing strongly, with combined profits for QANTAS Domestic and Jetstar of $600m announced in 2012. It is the international arm of QANTAS, the so called ‘long haul’ flights, which is in need of transformation to turn from a loss maker ($450m in 2012) to a profit maker. By forging an alliance with one of its competitors, Emirates, QANTAS hopes to transform its international business as part of a successful renewal strategy for the long term. Short-term impacts of the agreement so far include the $50m cost incurred in shifting operations from Singapore to the Dubai base. On the other hand, the airline experienced a 600 per cent increase in sales on flights to Europe, and a 700 per cent increase in bookings from Emirates passengers to travel on QANTAS domestic flights, in the first nine weeks of operation of the alliance compared to the sales figures in the same period 2012. QANTAS believe that this indicates they are already improving their competitive position. QANTAS plans to pursue the development of more partnerships in Asia, for example in May 2013 the company expanded their code-share agreement with the airline China Eastern which offers passengers 18 direct flights to China per week. As QANTAS seeks to increase its use of strategic alliances and create a competitive advantage, clearly QANTAS is in it for the long haul. ACCC Approval The QANTAS Emirates alliance could not have proceeded without the approval of the Australian Competition and Consumer Commission (ACCC). The ACCC’s approval was granted because they were satisfied that the partnership will benefit stakeholders, especially customers, by improving operating efficiency and delivering better products and services in the aviation market. Examples cited by the ACCC included increased frequency of flights and number of destinations available under the one flight code, enhanced connectivity, scheduling and access to frequent flyer benefits. The ACCC granted approval for a five year period agreement, rather than the 10 year period proposed by the airlines.

 

While the ACCC gave its assent, its Chairman, Rod Sims, stated that he did not believe this alliance is crucial for the success of QANTAS into the future, as it provides “material, but not substantial, public benefits”; he also expressed concerns over the implications for the Trans Tasman (Australia to New Zealand) route, and has required that both airlines maintain their pre-alliance capacity on the Trans Tasman routes to avoid price increases in that market.

 

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