Cost Airline Companies: Virgin Blue, Jetstar and Tiger Airways

Introduction

The modern business world is highly competitive and in such industry as low cost air flights competition is also persistent. Customers seek for lower prices as travelling (including business trips) have become an indispensable part of the globalised world. In Australia, there are a number of low cost airline companies. Three major competitors are Virgin Blue, Jetstar and Tiger Airways. There are various ways to respond to challenges existing in the competitive market.

One of these tools is marketing joint venture. This strategy enables companies to decrease marketing costs, attract new customers, and enter new (often international) markets and so on. At the same time, there can be a number of issues such as cultural difficulties, communication, disputes on intellectual property and so on.¹ It is possible to consider two companies’ marketing joint venture to reveal benefits and hazards of this strategy as well as peculiarities of market competition.

Brief Descriptions of the Companies’ Peculiarities

It is possible to analyse marketing joint venture of such low cost airline companies as Jetstar (which is a subsidiary of Qantas Airways) and Virgin Blue (which is a subsidiary of Virgin Airways). The two companies have been seen as two major competitors as they both occupy the same niche. Some of the most common marketing strategies for the companies aimed at winning the competition was reduction of prices. The companies had to cut prices as well as costs to win customers’ preference. Clearly, this is far from being the most effective tool as the companies lost their profit and the quality of services provided tended to decrease. It is necessary to provide some details on the two companies.

Virgin Blue was established as a low cost airline company. However, customers are often dissatisfied with the fact that the prices are often getting higher in the process of booking.² Jetstar remains a low cost carrier and the prices are always quite low. This often makes the company number one choice for many travellers. At the same time, Virgin Blue provides various associate services (call centres, late booking and so on) while Jetstar’s services are quite scarce.

More so, Virgin Blue provides high-quality services and customers appreciate this thoughtfulness and are ready to pay more, whereas Jetstar’s staff can be rather unfriendly and unhelpful which causes considerable inconvenience and frustration to the company’s clients. As has been mentioned above, the central factor affecting clients’ decisions is the price and the companies focus on this aspect in their marketing strategies.³ Customers often switch from company to company in their search of lower prices or better services.

Marketing Joint Venture and Its Benefits

As has been mentioned above, the market of low cost flights providers is rather competitive in Australia as there are smaller competitors. Thus, Blue Virgin and Jetstar have to compete with each other as well as other smaller companies.⁴ It is noteworthy that the companies had significant issues in the time of global financial constraints and they cannot afford costly marketing campaigns or losses resulting from ineffective strategies.

The two companies decided to start a marketing joint venture that implies close cooperation of their marketing departments. This can be an effective strategy as it will enable companies to solve a number of issues. First, they will not have to compete with each other anymore. Therefore, both of them will remove a competitor. Furthermore, the companies will be able to invest less in research and development of new effective marketing strategies.⁵

The two departments can share their experiences and come up with new ideas. It is necessary to add that Jetstar will definitely benefit from such cooperation as the company will be able to improve quality of services provided. The companies will be able to develop a marketing strategy that will take into account features of the both partners, peculiarities of the market and customers’ needs. Investment into development of new strategies will not be overwhelming for both partners.

It is also possible to state that such joint ventures often lead to positive stock market reaction.⁶ People often positively respond to such news. In the case with the two companies in question, this is also likely to be true. As has been mentioned above, consumers dislike rising prices in Virgin Blue and low-quality services of Jetstar. Combination of the two companies, ideally, will lead to creation of a company that provides high-quality services at low costs (which remain unchanged during the booking process). The two companies will attract loyal customers and will be able to attract new ones.

This strategy can make the two partners more competitive as they can develop a strategy based on each other’s strengths. Admittedly, the joint venture will enable the companies to increase their operations and keep prices low. In the period of financial challenges, smaller competitors are unlikely to be able to compete. Furthermore, instead of cutting prices, the companies will add more value to the services provided.

Marketing Joint Venture and Related Hazards

At the same time, marketing joint venture can also be associated with certain hazards. For instance, all companies have rather different corporate cultures and it may be difficult for the staff to cooperate. It is important to remember that marketing joint venture requires significant degree of commitment and determination. Hence, if the two companies pay little attention to this aspect there are odds that the marketing strategies developed will be inefficient.

It is also necessary to remember that joint ventures tend to be temporary strategies as the average lifespan of such ventures ranges from four to seven years. Hence, it is essential to be ready to such cooperation termination. Managers have to pay special attention to intellectual property protection when the joint venture ceases to exist.⁷ It can be beneficial for the partners to create a plan of such termination where all details will be outlined clearly. This will enable them to avoid numerous issues.

Conclusion

On balance, it is possible to state that marketing joint venture designed by Virgin Blue and Jetstar can be regarded as an example of effective tool to respond to heavy competition in the market. Two major competitors combined their marketing departments to develop a new marketing strategy. This approach will enable the businesses to keep prices low (which is crucial for customers), keep customers and attract new ones, increase quality of services and add value to the services provided. At the same time, the companies have to take into account certain hazards associated with marketing joint venture. They should develop a detailed plan of termination of the joint venture. However, if implemented properly marketing joint venture can help companies to cope with various issues and remain competitive in the modern business world.

Bibliography

Corrie, Clint A., ‘United States’ (2012) 1 International Joint Ventures 1-30

Fang, Eric (Er) and Shaoming Zou, ‘Antecedents and Consequences of Marketing Dynamic Capabilities in International Joint Ventures’ (2009) 40 Journal of International Business Studies 742–761.

Liu, Jonathan, John Aston and David Acquaye, ‘International Joint Ventures: Do They Enhance Shareholder Value?’ (Working Paper No 1403, Regent’s University London, (2014).

Sweeney, CB and B Bender, Marketing and the Law (LexisNexis Butterworths, 2011)

Wallbank, Paul ‘Jetstar vs Virgin’ Decoding the New Economy (2013). Web.

Footnotes

1. CB Sweeney and B Bender, Marketing and the Law (LexisNexis Butterworths, 2011) ch 2.3.4.
2. Paul Wallbank, ‘Jetstar vs Virgin’ Decoding the New Economy (2013). Web.
3. Ibid.
4. Ibid.
5. Eric (Er) Fang and Shaoming Zou, ‘Antecedents and Consequences of Marketing Dynamic Capabilities in International Joint Ventures’, (2009) 40 Journal of International Business Studies 756.
6. Jonathan Liu, John Aston and David Acquaye, ‘International Joint Ventures: Do they Enhance Shareholder Value?’ (Working Paper No 1403, Regent’s University London, 2014) 1.
7. Clint A. Corrie, ‘United States’, (2012) 1 International Joint Ventures 20.