Article Title: "Jetstar to enter Tasman dogfight " Source: The Australian Date: 3rd August 2005 Author: Steve CreedyOVERVIEWThe article by Creedy looks at the newly announced expansion of Jetstar Airline services from its current domestic Australian flight service to its penetration of the trans-Tasman market. Jetstar's original purpose was to provide Qantas (Same Ownership) a cost-effective alternative for the provision of domestic flights around Australia while also giving customers a cheaper and somewhat "no frills" option when flying locally. The article outlines the considerations and specifications that Qantas and thus Jetstar have undertaken in order to accomplish its "first foray overseas" as part of its "segmentation strategy". Jetstar's expansive venture is then obviously significant and relevant to the study of international business's (any business transaction which involves a cross-border commercial transaction) and the goals and barriers achieved and endured. WHY THE ARTICLE IS SIGNIFICANT TO IBSubsidiesThe article suggests that Qantas may draw upon subsidy advantages granted by the Australian government through the all-economy "Australian Airlines" subsidiary in order to help the expansion of Jetstar on "low-yielding routes". The government's efforts to promote international trade and investment as well as Qantas's new enterprise agreements with Australian flight attendants will allow Jetstar's "Cairns-based subsidiary to use new aircraft's, hire foreign crews and fly further".
This permits Jetstar to hurdle non-tariff legal barriers to international expansion such as the labour laws that would otherwise prohibit Jetstar to hire overseas employees or undertake lengthy flights. The efficient use and exploitation of provided subsidies by Qantas and Jetstar are evidently significant in the study of international business's as they try to overcome barriers to overseas markets. Trade Agreements Although the impacts of globalization, the emergence of strategic alliances between firms and the establishment of bilateral trade agreements between nations are not explicitly mentioned in Creedy's article, they are the unspoken givens of a business report in contemporary times. The article places emphasis on Jetstar's expansion to New Zealand, a venture only made easier through the improved relations (especially within trading) between Australia and New Zealand. Their Closer Economic Relations (CER) trade agreement together allows for the liberalization of trade through reduced tariffs, reduced quantitative restrictions on exports and free migration of labour. Such an agreement "was aimed not only at expanding trade but also strengthening and fostering links and cooperation in fields as diverse as investment, marketing, the movement of people, tourism and transport" (Mahoney, Trigg, Griffin, Pu stay, 2001, p 317).
Such measures make evident the reasons behind the "dogfight" taking place in the trans-Tasman market as Qantas competes against Pacific Blue and Air New Zealand by expanding Jetstar, allowing for an addition of "1500 seats a week to the Qantas Group's existing trans-Tasman services". The article inadvertently displays Qantas's awareness of their external environment as they expand to a growing market thorough the international expansion of Jetstar and thus being highly relevant to international business. Dumping The article makes a brief mention of Dumping i.e. when an exporter charges a lower price to overseas nations than the price they charge in their home nation in order to eliminate local competition or to finish the sale of unpopular goods. Creedy suggests that the over-saturated "bloodbath" of a market in which Jetstar is to venture, has led to airlines being accused of "Capacity dumping" of which is illegal under Anti-Dumping laws that protect local industries.
This is an issue often debated within the topic of international business's and may damage a firms reputation as seen with Creedy identifying the airline 'Emirates' as a possible offender. Benefits of International Expansion Perhaps the most obvious and essential observation to be made when expanding a business internationally is the benefits available. The relevance of the article most simply is to list a selection of such benefits". Undercut low-cost rivals Pacific Blue and Air New Zealand's Freedom Air" "Replace higher-cost Qantas services" with a more cost-efficient Jetstar service.
Gain a larger market share and "grow overall market " Gain access to resources Gain economies of scale " Compliment the Qantas presence".