Global Environment of Their Host Market

It is important for an MNC to understand the global environment of their host market before formulating and implementing strategic plans on an international scale. In order for an MNC to enter a new international market it needs to “At a basic level, a company must examine different markets, evaluate the advantages and disadvantages of entering each, and select only the markets that show the greatest potential for entry and growth… it must know what that market is like” (Advameg, Inc, 2014). For successful implementation to occur it is imperative that the MNC understands the environment in which its host country operates. Globalisation has led to increased integration between different countries and their differing cultures and economies. Without this understanding it is difficult for an MNC to enter the market let alone operate successfully.

It is important for Air NZ to choose a strategy that fits with the global environment so that it can remain competitive. Currently Air NZ operates using a global strategy, a structure under which global operations are organised on a geographic rather than product basis (Luthans & Doh, 2012). Air NZ currently has services all around the world, but is currently centrally based in New Zealand.  For Air NZ to be successful in international markets, it is important for them to differentiate their base customer service in Germany to suit the more strict nature of German culture. It is important for Air NZ to differentiate their airline service from their competitors to maintain their edge.

For Air NZ in Germany, it is important to use both the economic and quality approach. Economic imperative bases itself on cost leadership, differentiation and segmentation on an international level (Luthans & Doh, 2012). “Quality imperatives involve strategic formulation and implementation utilising strategies of TQM to meet or exceed customers’ expectations” (Luthans & Doh, 2012). The airline industry is an extremely competitive environment in which airlines needs to use differentiated strategies that meet the needs of the targeted segmented market and even more so with continuing deregulation. Thus Air NZ needs to understand their segmented market in order to successfully differentiate themselves from their rivals.  New Zealand is ranked 16 in the list of Best Airlines 2014 (Skytrax, 2014). It needs to ensure that its quality can match its European rivals in Germany. Lufthansa is ranked 6 places higher than Air NZ (Skytrax, 2014). Air NZ needs to create a joint venture in order to reap the high quality benefits of the European airline, which includes Lufthansa’s 1st place ranking as the world’s best transatlantic airline.

Air NZ faces little competition in the New Zealand market with a monopoly over small domestic airports. The domestic competition is a low cost airline which cannot provide the same standard of service that is offered by Air NZ. New Zealand was ranked 1st by Skytrax awards as the best premium economy provider (Skytrax, 2014). In New Zealand, Air NZ would only have to use the quality imperative as they already reap the economic benefits in the domestic market. Air NZ would only need to ensure it could compete with a superior quality service within New Zealand to ensure a successful organisation.