The Low Cost Airline Air Asia

The Low Cost Airline Air Asia The low-cost concept became a moneymaker in the United States, where it was pioneered in the 1970s by Southwest Airlines, the model for budget carriers elsewhere like Ryanair and easyJet in Europe. Definition of low cost airlines A low cost airline generally has many features that differentiate it from the traditional carriers. These features include ticketless travel, online ticket sales, no international offices, no frequent flyer points, no free food and beverages, no inflight magazines, no club lounges, use of secondary city airports. Not all low cost airlines have these features, and not all airlines that have some of these features are low cost airlines. For example, Virgin Express is a low cost airline, but it still offers complimentary coffee and inflight magazine, and they are based at Brussels primary airport. Case Study-AirAsia Story of AirAsia Air Asia, as the second Malaysian National Airline, provides a totally different type of service in line with the nations aspirations to benefit all citizens and worldwide travellers. Such service takes the form of a no frills low airfares flight offering, 40%-60% lower than what is currently offered in this part of Asia. Their vision is Now Everyone Can Fly and their mission is to provide Affordable Airfares without any compromise to Flight Safety Standards. The story of emergence of AirAsia is similar to Ryanair, since both carriers underwent a remarkable transformation from a money-losing regional operator to a profitable, low cost airline. AirAsia was initially launched in 1996 as a full-service regional airline offering slightly cheaper fares than its main competitor, Malaysia Airlines. Before 2001, AirAsia fail to either sufficiently stimulate the market or attract enough passengers from Malaysia Airlines to establish its own niche market. The turnaround point of AisAsia is in 2001, while it was up to sale and bought by Tony Fernandes. Tony Fernandes then enrolled some of the lending low-cost airline experts to restructure AirAsias business model. He invited Connor McCarthy, the former director of group operation of Ryanair, to join the executive team. In late 2001, AirAsia was re-launched in Malaysia as a trendy, no-frills operation with three B737 aircraft as a low-fare, low-cost domestic airline. Opportunities faced by AirAsia in light of external development Low fare of Indonesia-Malaysia trip The fare for a Jakarta-Johor Baru trip costs Rp 100,000 (RM 88.88 one way). And charge Rp 150,000 for a Bandung-Kuala Lumpur flight, and Rp 300,000 for a Surabaya-Kuala Lumpur trip, whereas a Jakarta-Kuala Lumpur air ticket from Malaysia Airlines available at travel agents cost Rp 1.4 million. Meanwhile, Lion Air on the same route, charged Rp 1.05 million. The low fare provided by AirAsia helps it open the Indonesia market. Low fare of Singapore-Bangkok service AirAsia will increase its services between Singapore Bangkok by introducing a 2nd daily flight to its existing schedule. This recent development came barely a month after Thai AirAsia operations started its first international flight to Singapore in early February this year. AirAsia is offering its guests promotional fares to/from Singapore- Bangkok from SGD$23.99 (THB 499) one way from the 28th March to 30th Oct, 2004. It is much lower than the lowest fare SGD$56 offered by full-service carrier. This helps it open the Singapore market. Political connections AirAsia hold 49% of Thai AirAsia with 1% being held by a Thai individual. The remaining 50% is held by Shin Corp. which is owned by the family of Thailands prime minister, Thaksin Shinawatra. Shin Corp. has financial strength, synergy in ingormation technology and telecommunications, which support AirAsia Internet and mobile phone bookings. Shin Corp. allows subscribers of the Shin mobile phone flagship, Advanced Information Service, being able to reserve tickets through its short-messaging service (SMS). AirAsia with its politically powerful backer may well grow up to bite. This helps it open the Thailand market. Malaysian government support The Malaysian government supported the establishment of AirAsia in 2001 to help boost the under-used Kuala Lumpur International Airport. AirAsias flights from Senai are meant to develop Johor into a transport hub to rival Singapore. AirAsia, therefore, can provide an alternative route to travel to Bangkok, by using Senai Airport in Johor Bahru, in southern Malaysia. Opportunities faced by AirAsia in light of internal development Issue of IPO Kamarudin Meranun, AirAsias Executive Director announced the appointment of Credit Suisse First Boston (CSFB) and RHB Sakura Merchant Bankers (RHB) as the bookrunners for the companys upcoming Initial Public Offering (IPO). The IPO strengthens AirAsia balance sheet, further cuts its existing low costs at 2.5 US cents per ASK and accelerates our growth plans throughout Asia. The IPO also allows AirAsia to expand its fleet of 18 Boeing 737-300s. Political connections Thai AirAsia is a join venture established by AirAsia with Shin Corp. Shin Corp. is owned by the family of Thailands prime minister, Thaksin Shinawatra, and about 900 million baht will be invested in Thai AirAsia over a five-year period. Shin Corp. oversees the finance and administration of Thai AirAsia while AirAsia shoulders the responsibility for marketing and operations. Shin Corp. has financial strength and supports AirAsia to grow. AirAsia with its politically powerful backer may well grow up to bite. Challenges faced by AirAsia in light of external development Indonesian habit Preferences of Indonesian passengers are quite different from the concept of cheap air travel without extra service for the passengers (free snacks and drinks), and also their reluctance to bring light baggage. AirAsia prefers passengers with very light and minimum baggage. If this is the case, it may not last long. But Indonesian domestic airline companies are able to provide value-added extras like food and beverages as part of their service to the passengers, although at a relatively higher cost. The comparative edge of Indonesian domestic airline companies compared to AirAsia concerns habit (culture). Furthermore, Indonesian domestic airlines were already trained with the low-cost air travel concept, known as tariff war. They have proved themselves as immune, and managed to survive. Last but not least, the Indonesian government or domestic airline companies had never announced the availability of a low-cost airline company of the country. All these affect AirAsia growth in Indonesia. Singapore government rejection Initially, AirAsia wanted to start flights from the southern state of Johor, near Singapore, it hoped to attract passengers by running a convenient bus service to the city-state. However, Singapore quickly quashed that idea. The Singapore government said it would not approve a bus link for AirAsia because it was not in her national interest, reflecting fears that Singapores Changi airport would lose business to Johors new Senai airport. This makes AirAsia cannot abandon the use of Changi airport, and therefore suffer from a higher cost. This is because AirAsia flying to Singapore needs to suffer from flight congestion of Changi. Changi has drawbacks of flight congestion that could prevent the quick turnarounds essential to keeping down costs. AirAsia finds it stuck between big planes and circling to wait for a slot to open up, which means extra fuel costs. Moreover, the SGD$21 departure and security tax of Changi is too high for AirAsia low-cost operation. AirAsia had asked the Singapore government to waive the fees, however, a request that was not only rejected but also criticized. Besides Singapore Bangkok, AirAsia now provides an alternative route to travel to Bangkok, by using Senai Airport in Johor Bahru, in southern Malaysia. Seeking to cater to the different markets, fares for Johor Bahru- Bangkok are generally 20 % lower in comparison to Singapore Bangkok. AirAsia currently operate daily flights to Bangkok from Johor Bahru. However, the choice proved unpopular, as the route failed to attract Singaporeans because of the additional cost and inconvenience of having to travel in and out of Malaysia by road. All these affect AirAsia external growth. Minimum air-fare rates AirAsia faces challenges finding open takeoff and landing slots at opportune times, and Thailands regulation that sets minimum air-fare rates. Although Transport Minister Suriya Jungrungreangkit said the current minimum air-fare regulations will be scrapped to open up the market, he couldnt name a date when this will be done. This seems to be favoritism toward Thai Airways Internationals domestic operations, and affects Thai AirAsia to compete in the Thailand market. External Changes which have impact on AirAsia Asias middle class growth Low cost airlines are anticipated to have greater potential in Asia as there are many Asian cities with a population above one million people each as well as a rising middle class population. This growth of middle class in Asia provides a huge market potential for AirAsia to grow. However, as the market is becoming larger, more airlines or new comers would like to get a piece of the action. For example, Budget airlines, it is estimated, will capture at least 25% of Asias air travel market within next 10 years and a lot of that will be new, not diverted, traffic. Therefore, AirAsia will face more competitions at the same time. Besides the low cost airlines, AirAsia still needs to compete with the conventional carriers. Although extra passengers of the low cost airlines will be coming from the new demand to be created by the low fares, the growth may not be entirely stolen from big flag carriers. Actions of Changi and nearby airports The growth of low cost airlines in south-east Asia has a significant effect on which airports will dominate the regional aviation market. Low cost airlines are seen as helping funnel more passengers to airport hubs. Therefore, there is a realization among regional governments that they need smashing airports and feisty carriers or they are going to miss out big time. Therefore, these governments are more willing to support low cost airlines. For example, the Malaysian government supported the establishment of AirAsian in 2001 to help boost the under-used Kuala Lumpur International Airport, and Thai premiers Shin Corp. forms a join venture with AirAsia that would benefit Bangkoks new airport and create a new hub at Chiang Mai. Therefore, under this situation, it helps AirAsia grow in Asia. Moreover, as there is a growth of several south-east Asian airports, this poses a challenge to the status of Singapores Changi airport as a regional aviation hub. These airports include Johors new Senai airport in southern Malaysia, Bangkoks new Suvarnabhumi airport which will be able to handle 45 million passengers when it opens in 2005, Bangkok Don Muang which recently overtook Changi in passenger numbers, etc. To maintain Changis position as the air hub in the region, Singapore is proposing a budget airline terminal at Changi by 2005 and lower passenger taxes to attract low cost airlines. This helps AirAsia grow and lower the cost. Actions of existing airlines The existing airlines in south-east Asia have several actions to compete with AirAsia, for example, some have launched a low cost airline to fight with AirAsia. Singapore Airlines launched a low cost airline subsidiary, Tiger Airways, in the second half of 2003, only months after the scheduled launch of ValuAir set up by one of its former executives. Orient Thai Airlines launched a new low cost airline subsidiary, One-To-Go. One-To-Go operates with a fleet of six Boeing 757-200s and match any fares that Thai AirAsia offers. Thai Airways have frequency and capacity to offer to their 13 domestic destinations. They also have, during the past two years, worked to improve operational efficiency, slashing unprofitable domestic routes, increasing flights on busy routes, strengthening yield management and controlling costs. All these make AirAsia face a huge competition. Critical success factors in the Low cost airlines in Asia Reduction in operational cost Low cost airlines strive to achieve the lowest possible price for their products and services. Low prices cannot sustain unless the company maximizes its operational efficiency. The success factors of Asian low cost airlines in reducing their operational cost include: Service savings (no frills cabin service and extensive use of outsourcing) NO-frills include: NO drinks, NO food, NO headphones, NO newspapers, NO movies, NO VIP lounges, NO expensive offices, NO mileage programs, NO seat allocation, NO childrens fares, NO paper tickets (Electronic tickets only), NO connecting flights (All flight-legs must be booked independently) Operational savings (point-to-point services and uniform fleet) Overhead savings (internet sales and streamlined bureaucracy) We can compare the operational cost in terms of costs per available seat kilometer (ASK), a measure of the running cost of the airline. For instance, Ryanair in Europe is almost half of the ASK price comparing with the full services airline. The average fare offered by Air Asia in Malaysia is 40-60 % lower than its full-service competitor. Competitive Ticket price against traditional full-service airline Low cost airlines begins with two initial cost advantages arising from the very nature of their operation: higher seating density and higher daily aircraft utilization. By removing business class and reconfiguring their aircraft, low cost airlines can increase the number of seats on their aircraft. Seat pitch of a low cost airline is usually 28 inches, compared to a traditional conventional economy class pitch with 32 inches. Doganis (2001) calculates that should be able to operate at seat cost that are only 40-50 % those of mainline rival. Combining the load factor benefit and beneficial distribution cost, low cost airlines cost per passenger can reduce price by one-third of conventional airline. Flying out of secondary airports Many low-cost airlines keep expenses down by flying out of secondary airports, avoiding major hubs where takeoff and landing fees are much higher while still getting passengers close enough to their destinations. The travel distance is short As the routes offered by low cost airlines are mainly short, domestic routes which may only take one to two hours, travellers might be fine with no amenities on flights Success factors in AirAsia Absolute Cost Advantage Low cost per average seat kilometer AirAsia focused on ensuring a competitive cost structure as its main business strategy. It has been able to achieve a cost per average seat kilometer (ASK) of 2.5 cents, half that of Malaysia Airlines and Ryanair and a third that of EasyJet. AirAsia can lease the B737-300s aircraft at a very competitive market rates due to the harsh global market conditions for the second-hand aircrafts because of the September 11th event in 2001. On the other hand, the operating cost of the company is also dropped drastically. Low distribution cost AirAsia focus on Internet bookings and ticketless travel allowed it to lower the distribution cost. Attractive ticket price With the average fare being 40-60 % lower than its full-service competitor, AirAsia has been able to achieve strong market stimulation in the domestic Malaysian air market (Thomas 2003). For instance, the fare for the trip from Kuala Lumpur to Penang on AirAsia starts from 39 ringgit. Comparing to trip by bus charge 40 ringgit and 80 ringgit by car. The effect of attractive low fare is more travelers switching from bus to air, similar case as Ryanair in Europe. Good Management Team AirAsia value proposition is more sophisticated than Ryanair placing equal emphasis on brand reputation and customer service/people management, by a senior advisor to AisAsias top management team. AirAsia pursue a Ryanair operational strategy, Southwest people strategy and an Easyjet branding strategy. Weakness Fair availability The availability of AirAsia is not good as traditional airline as it only provide unique aircraft. However, it cannot be the cost leader if it offers customized features or comprehensive support which will result in increasing operational cost. However, focus on a specific customer may avoid straddling. Case of straddling A Japanese low cost airline, Skymark, trying to be everything to everyone targeting the broader customer and offering limited special features (satellite TV, Business class and charter operations). The result is failing to both cost efficient and price competitive rendering it vulnerable to market forces and customer demand (porter1996; Lawton 1999). Major strategic directions recommended Open more Asian market Low cost airlines are anticipated to have greater potential in Asia as there are many Asian cities with a population above one million people each as well as a rising middle class population. It is time for AirAsia to exploit the potentials of affordable air travel by Asias growing middle class. Besides starting services to the Pearl River Delta in south China in 2004, AirAsia can expend its services to the coastal cities in China. Besides the growth of Asian middle class, the liberalization of aviation sector of India is another reason for AirAsia to open more Asian market. The Indian government has liberalized the aviation sector long dominated by the national carriers. Now, only a few low cost airlines, e.g. Air Deccan, Airone Feeder Airline Pvt Ltd, Crescent Air, have launched their services there. Moreover, the national carriers, Indian Airlines or Air India, despite their domination of the Indian skies, do not seem to be much interested in operating low-cost services. Therefore, it is a good chance for AirAsia to open the Indian market. Join venture with Virgin Group AirAsia should put more effort to set up a pan-Asian low cost airline with Virgin Blue, which is a low cost carrier of Virgin Group serving Australia and New Zealand mainly. Virgin Blue has suggested it may extend services to south-east Asia. Therefore, setting up a join venture with Virgin Blue can help AirAsia to grow in Asia even further, and help Virgin Blue to extend services to south-east Asia. Recommendations to maximize competitive advandages of AirAsia 1. Enforce Political advantages AirAsia established a join venture, Thai AirAsia with Shin Corp. Shin Corp. is owned by the family of Thailands prime minister, Thaksin Shinawatra, and about 900 million baht will be invested in Thai AirAsia over a five-year period. Shin Corp. has financial strength, synergy in ingormation technology and telecommunications, which support AirAsia to grow in Thailand. AirAsia with its politically powerful backer can well grow up to bite, and therefore it should enforce such political advantages in order to extend the growth in Thailand. Furthermore, AirAsia should use its Thai subsidiary, Thai AirAsia, to claim the use of Thailands open skies agreements to fly to Singapore, Brunei and Cambodia, overcoming the barrier of bilateral aviation pacts that threatened to limit its growth. Induction of smart cards AirAsia can issue a smart card which is compatible with the existing ticketless booking. It can offer 2 kinds of smart cards. The first kind of smart card, aimed at ordinary travellers, will offer instant rewards when topped up, offering greater value than its purchase price. For example a Bt5,000 card may be worth Bt5,500. The card can also be used by other people with the same family name as the cardholder. The second kind of smart card will offer unlimited travel for frequent flyers. Priced provisionally at Bt20,000, cardholders will be allowed make as many trips as they want within a specified period. Conclusion A study by the Centre for Asia Pacific Aviation (2002) confirms that Asia continues to offer attractive conditions for the air transportation industry. With thirteen out of worlds top twenty-five major urban centres located in the Asia Pacific region and a rapidly increasing urbanization trends, the Asian air travel market is bound to continue to grow. Urbanization is highlighted as one of the key drivers for the growth in air travel. It is estimated that Asia would account for 30% of the world market by 2019, or one third of growth between now and then. While the impact of SARS is going to slow down the growth of Asian regional demand, the long-run forecast continues to be very positive. These enable low cost airlines to grow even further.

Zipcar Individual Case Brief

Zipcar Company is affected by several general environment factors including the following: Sociocultural: There is very well developed public transportation system available in the urban areas and people can easily get the mobility through public transportation. Easy access to the public transportation affects Zipcar’s business to minimize its revenues. Economic: Due to the high gas prices, it is not easy for the companies like Zipcar to compete in the market but the Zipcar can come up with hybrid cars to overcome this threat. Technological: Zipcar has now its own application to select the cars and this application makes the process easy for the customers in selecting the right vehicle. Technology is helping the company to better facilitate its customers. Zipcar company is attractive for the new entrants and the business has enough potential to generate above average profits. Following are the most important of five forces affecting the Zipcar business: Threat of new entrants: Threat of new entrants is high for this company. There are many other companies like Enterprise car rentals can also offer car sharing services. Threat of substitute products: Zipacar is a unique business model and the threat of substitute product is low because it needs a big business setup to establish business model similar to the Zipcar. Following are the two main companies that are in the competition with the Zipcar. Enterprise rent a car: Enterprise rent a car is a big car rental business and if they start the car sharing service in the future so it will become more competitive for the Zipcar to generate above average revenue in the market. Hertz car rental service: Hertz car rental can be another direct competing firm to the Zipcar. They are second largest in terms of fleet after Enterprise. Most important of the value chain factors are discussed in the following paragraph. Marketing and sales: Are very important factors that are important for the company. This business needs some proper marketing strategy to create awareness in the minds of the target audience. This factor is superior among the both competitors. Technological development: It is important for the Zipcar is a company and the company can use new technology including smart phone applications to attract new customers. This factor is superior among both competitors. Zipcars net profit margin for 2012 was 5. 26 million as compare to Hertz profit margin of 2. 69 million. The company has a social responsibility of keeping the environment clean and Zipcar is adding environment friendly cars to its fleet to keep the environment clean. Zipcar company is aligned with the market trend and this is the major strength that is attracting more opportunities and limiting threats to the company. Due to the seasonal demand for the vehicles Zipcar experiences low return in certain months that limits the opportunities and enhances the threats. Zipcar is offering the service that is valuable and rare but it is not costly to imitate for big competitors and there are also substitutes available in the market with little modification in terms and conditions. The competitive advantage for Zipcar is temporary. Zipcar’s business level strategy is highly focused on differentiation and offering environment friendly products. Corporate level of the strategy is not that developed yet and the company is having slow growth due to the income only from one sector. The company had a merger with Flexcar in 2009 and they also made alliance with Avancar in Spain due to its cooperative strategy. Company has not given a good international strategy even though they are also working in several other nations but they still need better business model to work internationally. Overall, the company has to work on the corporate level to compete both locally and internationally. Company is pursuing its business level strategy to win the market share. Firm needs to recruit more staff because there is a strong lack of customer service in their current business model and today, the companies with strong customer service are the one who has a big market share in the businesses. Most important 7’s factors are following: System: Company has uniform working criteria everywhere they work. Staff: Company works hard to boost the motivation of their employees. Skills: By hiring the right people and continuous training procedure the company is having edge over other competitors. Q1: How the company takes care of its stakeholders as they are major part of the process to generate above average returns? Q2: What strategy does the company have to response to the hyper-competition?

Global Expansion Plan

LETTER OF TRANSMITTAL 22 November 2012 Datuk Steven Sim Chief executive officer and managing director Secret Recipe Cakes and Cafe Sdn Bhd Malaysia Dear Sir, FINAL REPORT SUBMISSION – EXPANSION PLAN TO VIETNAM MARKET Please find attached the reported requested by the Board. This report reveals an insight into the Vietnamese market and explains why this is a potential one to invest in. We hope that the information provided is useful in the decision-making with regard to further development of Secret Recipe in the future.If you need any farther clarification on the report, please do not hesitate to contact me, the team leader, at an email address: [email  protected] nottingham. edu. my Yours sincerely, Nguyen Huynh Bao Ngoc On behalf of the Global Strategy Team Table of Contents 1. Executive summary3 2. Introduction4 3. Methodology5 4. Findings and Discussion6 4. 1. Motives of internationalization6 4. 2. Justification of entering into Vietnam6 5. Conclusion13 6. Recommendation s:14 6. 1. Most appropriate strategy14 6. 2. Entry mode14 6. 3.Appropriate organization structure15 7. References16 1. Executive summary This report critically examines the possibility of Vietnam to be the next stop in Secret Recipe’s global expansion plan. Initially, the report highlights the current great achievements that Secret Recipe has been attaining from its very first internationalized activity. Employing the proper strategy and being favored by consumers all guarantee an auspicious future for the chain. Taking all of these merits, the company consecutively looks for new marketplaces with new resources.Simultaneously, findings have shown that Vietnam is an appealing market because of its potentials in a fast-growing economy and long-term profitability, as well as rich resources. Then, the country risk analysis and the country market and industry opportunities analysis were introduced to evaluate Vietnam’s benefits and drawbacks. The result is that there are ro oms for both of them. Therefore, so as to be successful, recommendations on appropriate entry mode, strategy and organization structure are specified.To be more detailed, the most suitable entry mode is master franchising via a joint venture because it brings about the positively high certainty in operating. As for strategy, it is an international one to ensure consistency in the menu and concept by taking control over the core competencies and leaving other decisions to foreign subsidiaries. Besides, the Worldwide Area Structure is vital in terms of managing the company’s global expansion as it enables local responsiveness and decentralized authority, which both matter for future growth.Finally, the main conclusion is that Vietnam is the right solution for the Board’s decision to expand overseas. Nonetheless, the management should cautiously take into account the recommendations so that Secret Recipe can win. 2. Introduction Secret Recipe has gained its popularity not only in Malaysia but also across the region. The great succeed stemmed from the ambience brought to customers and the high-quality food served at reasonable prices. The number of foreign outlets is now exceeding 40 and is expecting to increase.According to Welch and Luostarinen (1988), internationalization can be described as a process by which the level of involvement in overseas activities of a firm rises. Indeed, adding the number of overseas outlets up to 100 was part of the ambitious global expansion plan. Recently, the company has spent RM60 million to invest in 2 more new markets which are India and Cambodia (TheSundaily. com, 2011). Evangelista (1994) argues that the readiness to fund international activities proves that firms desires to move further.In the past 3 years, the company has witnessed an annual growth rate of 30% (Articlebase. com, 2011). Taking advantage of both the reputation and the growth pace, it is the right time to put one step further and seize the oppor tunities available in a new market to grow even larger. The Global Strategy Team, after doing research on several potential markets within the Asian area, strongly recommends Vietnam. In this report, the motives of internationalization of Secret Recipe will be disclosed, as well as the motives of choosing Vietnam as a new international market will also be revealed.And as for a smooth penetrating process, recommendations relating to the strategy to be implemented, to the entry mode to be executed, and to the organization structure to be formed will be offered. 3. Methodology The information and data given were collected from many government and organization websites, namely Datamonitor, Trading Economics, General Statistics Office of Vietnam, etc. Besides, a proportion of them were also taken from reliable online newspapers such as TheSundaily. com.In addition, knowledge from International Business books and journals was also introduced to help provide a better understanding. Neverth eless, due to the unavailability of official information about Secret Recipe performance, the analysis had to rely entirely on online newspapers and the CEO’s reported interviews. In addition, the focus of the report is mostly on the food sector, not the franchising one. It is due to the well-structured characteristic of the franchising that it promotes a simple way to interpret and analyze.By contrast, food is a subjective topic as it relates to personal opinion, thus there are limits on suggestions. 4. Findings and Discussion 4. 1. Motives of internationalization Secret Recipe is now among the fastest-growing restaurant chains both domestically and regionally. For the last 5 years, the growth rate has been an amazing double-digit figure (TheSundaily, 2011), accompanied by a rapid increase in the number of outlets. Currently, its outlets present in 8 Asian countries including China, Australia and Pakistan.In any market, there is always a positive reaction from the consumers. A proven fact is that Secret Recipe has been awarded with many titles such as â€Å"Best Cheesecake award†, â€Å"Malaysia’s best local restaurant chain†, â€Å"Indonesian's Best Restaurant Award†, â€Å"Singapore's Excellent Food Award†, â€Å"Best Restaurant Award – Philippines Talter†, etc. This is to say, Secret Recipe, after securing its stance in Malaysia, is continuously gaining customer awareness and fame throughout the region. As a result, Secret Recipe’s movement could be best explained using Eclectic paradigm (Dunning, 1980, 1981).Among the 3 advantage factors recognized by the Eclectic paradigm, the Ownership advantage appears to be most relevant to the context of Secret Recipe. As stated above, the company now possesses a valuable intangible asset which is good brand awareness. Besides, stated in the theory, one of the reasons behind the internationalization of a multinational firm is market seeking investment. In this particular case, Secret Recipe is to exploit new market (i. e. Vietnam) because of its prospects of market size and market growth (Dunning and Lundan, 2008) 4. 2. Justification of entering into Vietnam Vietnam risk analysis:Political risks Vietnam is famous for its political stability. This diminishes the insecurity and uncertainty of foreign investors deciding to invest in Vietnam. According to Worldwide Governance Indicators (2011), the Vietnamese political environment remains almost steady in the past 15 years. Figure 1 Source: Worldwide Governance Indicators (2011) Note: Percentile ranks indicate the percentage of countries worldwide that rank lower than the indicated country, so that higher values indicate better governance scores. The line graphs include margins of error shown as dashed lines, corresponding to 90% confidence intervals.Competitive risks Corruption level in Vietnam is reported to be one of the highest in the world. According to Transparency International, 2011’s score was 2. 9, which increased 0. 2 points compared to the year before. Indeed, in comparison to other countries in Southeast Asia such as Malaysia and Thailand, Vietnam’s freedom from corruption index remains low (refer to figure 2). However, the formation of the Vietnam Anti-Corruption Initiative Program 2011 (VACI) supported by World Bank somehow saves the situation. Figure 2. Vietnam’s freedom from Corruption in comparison with Malaysia, Thailand and the World AverageSource: Heritage (2012) Operational risks Suppliers play an important role in deciding the quality. In any market, suppliers are abundant but not all of them can provide what Secret Recipe desires for a good menu. Therefore, an insightful search should be carried out before entering the market. Economic risks The inflation rate of Vietnam fluctuates wildly (refer to figure 3). This issue somehow imposes a concern, as the less wealthy class will be more conscious with eat-out whenever the rate is high, which eventually will negatively impact the foodservice sales. Figure 3 Source: TradingEconomis. om | General Statistics Office of Vietnam Vietnam market and industry opportunities: Market: In the World Bank’s 2011 Annual Report, Vietnam is perceived to reach a middle-income level country soon enough. The Vietnamese foodservice industry grew at a CAGR of 6% from 2005 to 2009. It is estimated that the growth rate would be at a CAGR of 4. 5% from 2010 to 2014 (Datamonitor, 2011). In recent years, the country has also witnessed a steady urbanization, with a rate of 3. 1% in 2010 (ReportLinker, 2012) accompanied by a sharp rise in population, implying an increasing demand for food.The rationale behind this is that as people move to big cities to work, they will have little time to prepare their own meals. Thus, eating out becomes an optimal choice. Also, according to that report by ReportLinker, there has been a surge in the number of households in Vietnamese econo my. Two types of households that contribute the most the industry are single member households and working couples as it fits into their fast-paced lifestyle. Furthermore, Vietnamese population is huge (87. 84 million in 2011) and young. Specifically, in 2010, the group 15-29 (i. e. argeting customer of Secret Recipe) appeared to be significantly larger than others. It is predicted that the group will be expanding in the next ten years, indicating a long-term growth for Secret Recipe in Vietnam food industry. Figure 4. Vietnam population by age and sex in 2010 Figure 5. Vietnam population by age and sex in 2020 Resources: Labor: Secret Recipe can be beneficial from a low-cost and huge workforce. According to General Statistics Office of Vietnam, 57. 2% of Vietnam’s population participated to labor market and 32. 5% of them had undergone or completed a vocational/professional training.It somehow guarantees skilled labor force availability. Raw materials: Basic ingredients are available here in Vietnam. However, only qualified suppliers worth the contracts otherwise they may ruin Secret Recipe’s image. Nonetheless, some of the flavors can be costly as they are imported goods with high prices. An approach to this problem could be buying in bulk and storing them for further process. Location: A number of shopping malls and superior residential areas are being built as a developing plan (Food services in Vietnam, Market Analysis, 2012). Therefore, Secret Recipe can easily reach to its customers.Apparently, however, rental price should be considered consciously. Competition: Porter’s Five Forces model, which consists of five elements, is used to give an overall picture of the food industry in Vietnam. Intensity of rivalry: Medium Currently, in terms of cheese cake, which is a core product of Secret Recipe, there are no direct competitors as none of the existing players emphasize their menu on that. Nonetheless, as for other Vietnamese dishes tha t will be developed later on, Secret Recipe should be aware that they have been being offered by domestic independents for years (Food Service profile, 2012).Their primary advantage is the understanding of the market, customers and their taste, which will take times for Secret Recipe to gain. Threats of new entrants: Medium to High Setting up a food business generally does not require high capital in comparison to other businesses. However, the procedure to ask for permission to do business in Vietnam needs good relationship with the authorities. Undoubtedly, food is a recession-free industry; hence business entities can earn profit eventually setting foot into this industry. Bargaining power of suppliers: LowAs mentioned, in order not to ruin Secret Recipe’s name, only reliable and qualified suppliers selected. Therefore, once the contract is signed between the two parties, it will be a long-term one and thus the switching cost would be relatively high, causing the suppliers ’ bargaining power to be low. Bargaining power of customers: High Vietnamese food consumers are offered with many choices. Currently, there are several cake brands operating in Vietnam such as Paris Baguette, Chewy Junior (Singapore brand), Tour le Jour (Korean brand).Besides, street vendors’ food is plentiful with many different taste and prices to choose from. Consequently, together with a favor in low switching cost, customers can easily go to another restaurant if they want to. Threats of substitutes: High Cakes are not that essential in a person’s daily life. Moreover, food in general in Vietnam is diversified and can be found on any street with a relatively reasonable price, mostly serve local cuisines to their largely native customers especially in big cities like Ho Chi Minh City.Thus, when it comes to hunger, people can choose from a wide range of them. 5. Conclusion To put it in a nutshell, the motives of internationalization of Secret Recipe can be be st enlightened applying Eclectic paradigm, particularly the Ownership advantage. At the moment, the company’s strategy is trying to spread its brand name beyond borders by constantly looking for new international markets and by bravely spending budget on them. Accordingly, one with great potentials would be worth the investment.All the findings and data have proved that Vietnam comes in the first place in the list of promising marketplaces due to its strongly growing economy, low-cost labor, and dynamic food market. Although entering into the country poses obstacles (e. g. intense competition, good authorities relationship) and economic threats (e. g. unstable inflation rate, high corruption rate), choosing the right strategy, the right means of going into it and building a suitable organization structure would foster an effective and efficient managing job. 6. Recommendations: 1. 2. 3. 4. 5. 6. 7. 1.Most appropriate strategy The most suitable strategy to be executed when ent ering Vietnam market is international strategy. There are two reasons for this choice. Firstly, the Secret Recipe’s menu on cheese cakes was originally developed by Malaysian chefs. People come to the restaurant mostly to enjoy the unique fine taste and the ambience there. Therefore, the R;D function should be in the home country so that the uniqueness making the brand name will always be the same. This happens to be parallel with the top management’s viewpoint in which the menu stays unchanged in any market.Secondly, the pressure for local responsiveness is low, not zero. Also, the most crucial characteristic of any organization is the willingness to develop products for foreign markets (Rosson and Ford, 1982). In fact, the success of Secret Recipe in foreign markets has its root in the willingness to include the popular dishes of the local food culture. Furthermore, Vietnamese consumers favor their traditional dishes such as Pho, spring rolls, etc. Thus, being able t o fruitfully offer them in the menu will certainly be an advantage. 1. 2. 3. 4. 5. 6. 7. 1. 7. 2. Entry modeOviatt and McDougall (1994) advise that firms should use †alternative governance structures†, such as franchising, licensing. And together with the analyses about Vietnam risks and industry opportunities, the recommended entry mode for Secret Recipe is establishing a master franchise via a joint venture. The reasons are as follows. First of all, Secret Recipe is in the food industry where the best mean of doing business is franchising. Indeed, the company has achieved its regional prospect thanks to properly implementing that form. In other words, the management is experienced.Moreover, the franchising is now widely perceived and accepted by Vietnamese business entities and the government, making the process easier and less costly. Secondly, Secret Recipe is still on the progress of opening a foreign market, thus what matters the most to the management would be the development costs and risks. As a result, setting up a master franchise will somehow save the management from many problems as it is now the master franchisee’s job to select and train franchisees, select locations, etc. Also, the costs and risks will be shared with the local partner in a joint venture.Thirdly, there is always a need to reduce control challenges and to protect the brand name, as well as to benefit from a local partners’ knowledge of the host country’s competitive conditions, culture, language, political and business systems whenever expanding internationally. In this sense, a joint venture appears to be essential and practical. Besides, due to the complexity of Vietnamese market, a Vietnamese partner would be helpful in negotiating with the authorities, finding suppliers, recruiting personnel, etc. 7. 3. Appropriate organization structureIn terms of global expansion management, the recommendation structure goes to Worldwide Area Structure. The reason is that for farther development, Secret Recipe will obviously expand to other markets in different countries and territories around the world. Sooner or later, the management will have to deal with problems arising from dissimilarities in customers taste, operational issues, etc. Consequently, to save costs and efforts, it is necessary to have a decentralized bureaucracy, which can be built under a Worldwide Area structure.Plus, the structure facilitates local responsiveness, which is relatively crucial to a restaurant chain like Secret Recipe. On the other hand, the structure bears the threat of fragmentation of the organization. Hence, it needs close monitor and periodical review. [Words count: 2,254] 7. References A recipe for success (2011) [Online]. Available at http://top10malaysia. com/home/index. php/trail-blazing-companies/secret-recipe [Accessed 19th October 2012] B. M. Oviatt, P. P. McDougall (1994). ‘Toward a theory of international new ventures’.Jour nal of International Business Studies, 25 (1994), pp. 45–64 Corruption in Vietnam is serious, blatant, rampant (September 2012) [Online]. Available at http://tuoitrenews. vn/cmlink/tuoitrenews/politics/corruption-in-vietnam-is-serious-blatant-rampant-1. 85998 [Accessed 12th November 2012] Dunning, H. J. , ; Lundan, M. S. (2008). Multinational Enterprises and The Global Economy. (2nd Edition). UK: Edward Elgar Publishing Foodservice in Vietnam to 2014 (July 2011) [Online]. Available at http://www. marketresearch. com/Datamonitor-v72/Foodservice-Vietnam-6446347/ Accessed 28th October 2012] F. U. Evangelista (1994). Export performance and its determinants: some empirical evidence from Australian manufacturing firms ,in: S. T. Cavusgil, C. T. Axmin (Eds. ), Advances in international marketing, vol. 6JAI Press, Greenwich, CT (1994), pp. 207–229 General Statistics office of Viet Nam [Online]. Available at http://www. gso. gov. vn/default_en. aspx? tabid=515;idmid=5;ItemID=10 6550 [Accessed 5th November 2012] Hill, C. W. L. (2012), International Business: Competing in the Global Marketplace, (9th ed. McGraw Hill, p434-439. L. S. Welch, R. K. Luostarinen (1988). ‘Internationalization: evolution of a concept’. Journal of General Management, 14 (2) (1988), pp. 34–55 P. J. Rosson, L. D. Ford (1982). ‘Manufacturer–overseas distributor relations and export performance’. Journal of International Business Studies, Fall (1982), pp. 57–72 Secret Recipe to invest RM60m on expansion (December 2011) [Online]. Available at http://www. thesundaily. my/news/243733 [Accessed 21st October 2012] Secret Recipe in Malaysia (July 2011) [Online]. Available at http://www. articlesbase. om/customer-service-articles/secret-recipe-in-malaysia-5066674. html [Accessed 22nd October 2012] Secret Recipe plans more foreign outlets (January 2008) [Online]. Available at http://biz. thestar. com. my/news/story. asp? file=%2F2008%2F1%2F24%2Fbus iness%2F20105989;sec=business [Accessed 22nd October 2012] Vietnam Anti-Corruption Initiative Program 2011 Awarded 34 Proposals to Minimize Corruption http://web. worldbank. org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/VIETNAMEXTN/0,,contentMDK:22793085~pagePK:1497618~piPK:217854~theSitePK:387565,00. tml [Accessed 12th November 2012] Vietnamese foodservice: The future of food service in Viet Nam (October 2012) [Online]. Available at http://www. reportlinker. com/p01010818-summary/Vietnamese-Foodservice-The-Future-of-Foodservice-in-Vietnam-to. html [Accessed 5th November 2012] Vietnam Inflation rate http://www. tradingeconomics. com/vietnam/inflation-cpi [Accessed 11st November 2012] Vietnamese population pyramid for years [Online]. Available at http://www. nationmaster. com/country/vm-vietnam/Age_distribution [Accessed

Framework in the Goophered Grapevine Essay - 529 Words

Framework in The Goophered Grapevine The frame narrative in Charles W. Chesnutts The Goophered Grapevine creates a hidden tension between the viewpoints of the internal narrators voice and the voice of the external narrator. Uncle Julius McAdoo is Chesnutts internal narrator, and serves a storyteller in the story. He exemplifies the characteristics of a former slave such as being uneducated and unable to speak Standard English. Julius is old, poor, and uneducated. These characteristics set him up as being a person that lacks credibility. However, early on in the story Julius claims his credibility as a storyteller by saying Day ain naer a man in dis settlement w at won tell you ole Julius McAdoo uz bawn en raise on dis yer†¦show more content†¦On the other hand, John had learned that North Carolina was a great state to cultivate grapes, and his main goal was to move there to cultivate grapes while aiding in the improvement of his wifes health. He had already observed the condition of the vineyard and was confi dent that he could restore its productivity. The conflict of territory is present here. The incongruity of the internal narrator and the external narrator is the element that sets up the tension between the two characters. They both interact with each other cordially and respectfully. However, there is a presence of internal arrogance between the two narrators. John thinks of himself as smarter than Julius because he (Julius) is old, poor, and uneducated while Julius thinks he can out smart John because hes younger, wealthier, and lacks knowledge of the area. Julius is extremely good at storytelling because he yields to his audience and draws his audience in from the beginning of the story to the end, which is a tool involved in tall tales. Julius is a trickster and even illustrates his story with the character of a Yankee, who seemingly posses the same shrewdness as Julius. His illustration of a shrew Yankee also seems to be an indirect insult towards John because he too is a northerner. In the frame structure, the two voices operating off each other raise a question of motive between the two narrators. Julius motive is clearly to mislead John and Annie so that he will