Running head: INTERNATIONAL BUSINESS STRATEGY

International Business Strategy

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INTERNATIONAL BUSINESS STRATEGY

International Business Strategy

Introduction
There has been growing concern for the economic interdependence of nations on a global
scale. As a result, companies have stepped up the cross-border business transactions in the recent
past. Widespread sharing of technology, global economic shifts, and international governance
among others, have been the enabling factors. Visionary business leadership has transformed
national-level firms into robust multinationals that dispense a wide variety of goods and services
to a scale never witnessed before. As many companies yearn to take their business
internationally, they face ever-present challenges in the new business arena. Managers, therefore,
need to take a keen interest in assessing the corporate strategies to fit the demands of
international business so as to maintain their competitive edge and suitably serve the culturally
diversified individual and institutional customers.
This report analyses a myriad of aspects that multinational companies face in the global
provision of goods and services. In its deliberations, the reports deeply evaluate the National
Double Diamond model and its later improvement as well as the SAFe criteria that are essential
to business leaders in effectively engaging in international business. It gives insight on how the
varied features of the international business impact on the business strategy. Additionally, it also
highlights the best approaches the corporate managers reshapes their corporate strategies to suit
the international cultural diversity of the workforce, clients among other stakeholders effectively.
On more specific terms, the report gives recommendations that the Irish Ryanair undertakes to
establish successfully and run a strategic business unit in Australia.
The Features of Global Business and impacts on corporate strategy

INTERNATIONAL BUSINESS STRATEGY

According to Arnold (2013), the engagement in the cross-border business presents new
cultural and economic challenges. For instance, the customs, values, beliefs, ethical standards
and perceptions of the Irish nationals greatly differ from those of the Australian counterparts. The
corporate leaders of Ryanair need to redefine relationships with the clients, creditor, and
shareholders amongst other interest groups when carrying out business in Australia.
Secondly, the legal regulations also affect the global business. Garrett (2015), for
instance, suggests that regulatory environment in the Airline industry differs from country to
country. With the recent upsurge of terror-related risks, many countries have stepped up security
and screening and thus new companies need to play by such mandatory requirements. Garrett
(2015) argues that companies may be forced to subcontract security firms in governmentmandated partnership programs that could have significant cost implications to multinationals.
Thirdly, intense competition characterises the cross-border business. The new entrants
face cut-throat competition from the existing industry players that are familiar with the economic
landscape of the country. Chund and Tung (2014), maintain the worlds rapidly growing
population have multiplied demand for goods and services and thus enabled an intense global
competitive environment. Consequently, the demographic shifts in the Australian population
pose opportunities and challenges to the new firms such as Ryanair that intend to enter its
markets. The Ryanairs corporate leaders align their strategies in consideration of the
demographic composition of the clients the firm serves.
Fourthly, the cost of financing also is an essential deliberation in the global economic
environment. The Ryanair management team should streamline their financial strategies to obtain
finance at the lowest cost possible. Given the exposure to foreign exchange loss one million

INTERNATIONAL BUSINESS STRATEGY

Euros in the year 2010 and six hundred thousand Euros in the year 2012 in the consolidated
income statement (Johnson & Scholes 1999), the management team should restructure financing
strategies that aim to minimize exposure to foreign exchange risk and address the
unpredictability of domestic lending rates in Australia. Making of such key credit provision
decisions is critical for successful operations in the foreign strategic business units.
The Underlying Models and Theories
Porter (1990) recognises the importance of a firms competitive advantage in the foreign
strategic business unit. Consequently, Ryanairs corporate leaders should emulate Porters
Diamond model to achieve competitive advantage in the Australian market. According to
Johnson and Scholes (1999), Ryanair has attained competitive advantage in Europe for its low
pricing and no-frills positioning strategies. It therefore has to set its home-country diamond
against the triad diamond in Australia.

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The Porters Double Diamond Model

Source: Class Notes (Corporate Strategy and National Competitiveness, 2015)

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According to Ozgen (2011), Porters diamond of advantages explains the competitive

strategies of companies in four dimensions. As illustrated above, they are; the demand conditions
input or factor conditions, the firm strategy, structure and rivalry as well the presence of related
and supporting industries. Contextualising these components in the case of Ryanair Ltd, presents
the strategies that the firm requires in posting a superb performance in Australia.
Firstly, the factor conditions are evaluated the binary form. Ryanair needs the basic and
the advanced factors such as knowledge-based resources that confer the firm high-performance
advantages. Evidently the policies of the Australian government have focussed on information
gathering. The organisation could benefit from the robust information infrastructure available in
Australia. The comprehensive information system will support real-time decision-making in the
new SBU. Similarly, In Australia the capital resources and skilled manpower is efficiently
provided facilitating improved business performance. The country has some of the best research
infrastructure that encompasses globally-recognised universities and institutions. Other basic
factor inputs such as land, raw materials and spare parts for the aircrafts and machinery are
readily available. Porter (1990) argues that the presence of advanced factors foster competitive
advantage for given firm making an investment. In essence, basic factors cannot to sustain
competitive advantage of the firm on their own. Consequentially, Ryanair should leverage on
Australias basic factor and knowledge based resource to bolster its performance.
Additionally, Ryanair stands a good chance of earning a competitive advantage in
Australia due to the robust tourism industry such as snow tourism especially during the snow
games in winter is an ideal supporting industry. Moreover, the availability of international
aircraft supplier firms in Australia would greatly boost the operations in the new SBU. The
model provides that presence of supporting industries favour the firm in the attainment of

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competitive advantage. Studies show that the Austraian state and federal government have
devoted substantial efforts and resourecs to create prosperous clusters as the Silicon Valley.
Provision of the industrial clusters is an ideal method to allocate the scarec human and capital
resourecs to the major players. Given the presence of rival Airlines such as Rex and virgin
Australia, Ryanair would benefit from inter-industry synaergies to improve service delivery.
Additionaly, Ryanair would use the early home demand patterns in Ireland to be
innovative enough to the projection of demand in the foreign market. Efficacy in the analysis
will enable the firm to meet the sophistication of the consumers in Australia. Porter advocates
that domestic demand analysis is vital in helping the growth of the firm. Domestic demand
speeds up firms responsiveness to signals in the market and thus creates a learning organization.
Ryanair as a learning organisation incorporates innovation to meet the internationalised demand
patterns in Australias SBU (Porter 1990).
Contextualizing Porters last model of the firms strategy and rivalry, it is ascertained
with a degree of certainity that the airline industry is vigorous. Local rivals like Rex and Virgin
Australia have intensified the competition. Moreover, some of the players in the aviation industry
are multinationals. It is preemptive for Ryanair to adopt innovative and proactive strategies to
earn competitive advantage. To overcome the high entry barriers, Ryanair will need to provide
highly differentiated products and services.
Mehrizi & Pakneiat (2008), views Porters model as a sectorial model that is an extension
of the previous five forces model and value chain model. The organisational structure and rivalry
is a major component of Porters diamond model. According to Johnson & Scholes (1999)
Ryanair began as a family owned enterprise but grow rapidly to be a successful company. The

INTERNATIONAL BUSINESS STRATEGY

corporate leaders need to assess the management structure of the Australian SBU. Factors that
prompt consideration include the centralisation of decision-making, cost leadership, bureaucratic
levels and the management practices.

Porters Double Diamond Model: with exogenous variables

Firm Strategy,
Structure &
Rivalry

Chance

Demand
Conditions

Factor
Conditions

Related &
Supporting
Industries

Government

INTERNATIONAL BUSINESS STRATEGY

Source: Class Notes (Corporate Strategy and National Competitiveness, 2015)

The illustration above shows how the exogenous variables of government and 'chance
influences other factor conditions. Mehrizi and Pakneiat (2008) suggest that in international
business, government interventions could include travel policies, public procurement procedures,
availability of subsidies, and tax structure. On the other hand chance refers to the unpredictable
elements that affect the operations of the firm. They include changes in fuel costs, availability of
optimal climatic conditions, and influx of tour operations among others that could affect how the
Australias SBU carries out its operations. Studies state that chance and government actions role
greatly influence the smooth running of multinational organisations. It is relatively difficult to
predict chance or be immune against it. Consequently, innovation networks greatly support the
firm in effort to maintain the competitive advantage.
According to Johnson et al. (2011), the Bowmans strategy clock is another ideal model
that Ryanairs leaders could employ to earn competitive edge in Australia. From this perceptive,
the firm considers differentiation advantage or the cost advantage. The resource-based theory of
competitive advantage holds that firm can attain create goods and services unique to the industry
or be able to produce same goods and services at a relatively lower costs. Ryanairs renowned
low price strategy could pose risks regarding the price wars and low margins recorded. The cost
leadership style is an ideal way to address such risks. In the new SBU, the firms differentiation
in terms of the packages of services offered increases the perceived added value to the firm. If
the firm increases the airline flight costs, it risks losing the market share.
Rugman and DCruz (1993), suggest a modification of Porters model of Diamond
Conditions.' They fault Porters model as applying to giant economies only. They suggested a

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10

modification that comprise of the five partners (flagship) model. Under the new model, Ryanair
needs to create networks that promote cooperation and foster competitive advantage. According
to Rugman (2002), the model emphasizes strategic cooperative leadership to essential allies such
as top-rated suppliers, customers, and non-business organizations. The contemporary flagship
model is a critic of the internalization theory and affirms that decentralization creates effective
networks for successful cross-border business operations.
Ryanair as an international player needs to instigate cost-cutting corporate strategies to
enhance the capability to compete with the seven major Australian airline companies including
Quantas, Virgin Australia, Rex and Tiger air (Rugman et al. 2011). The effort to satisfy the
continual foreign consumer needs, partnerships has been handy in cost cutting initiatives and
creation of synergies that promote the business processes. Such competencies will minimize
liabilities in the balance sheet.
Multinational commercial establishments can derive great value from the established
networks. The management practices in Australia aim for cost minimisation and embracing
efficiency. The organizational leaders should employ foreign direct investments, global sourcing
as well as joint ventures. It assesses the cost advantages in creating a foreign business unit.
Ryanair s consideration to establish an SBU in Australia calls for assessment of labour costs,
fuel costs, assembly costs, incentives and taxes among other factors
According to Gerpott (2014), the strategic business partnerships have transformed
multinationals into flagship enterprises that are hubs of expertise as well as shared service core
organizations. The increasing acceptance and applicability of the five partners model
demonstrates its success in the international business. Ryanair Ltd could also establish and foster

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11

strong business networks with its subcontractors, aircraft equipment suppliers, institutional
customers among other interest groups. The partnerships will enable Ryanair to be a learning
organization and thus earn a competitive edge. Corporate managers could also use this approach
to solving workforce tensions by effectively dealing with the opposing forces.
The drivers of change
Some of the drivers of change that could influence the operation of the Ryanairs SBU
include among others the growth in the global market. Aviation studies point out that the
international passenger traffic has increased by a substantial fraction in the past few years. The
factor poses profound impacts on the Ryanairs performance in Australia. Another factor is the
changes in the aircraft design. In the recent past, technological empowerment has led to the
production of larger and fuel-efficient aircrafts like Airbus A380 are the game changers in the
modern-day skies. Lastly, the geographical location of Australia is of significant advantage given
it is a global hub that would ensure efficiency in the airline operations.
The SAFe Criteria in International Business
According to Johnson et al. (2008), the suitability, feasibility, and Acceptability model is
essential to understanding the workability of corporate strategies in foreign business. Suitability
entirely refers to the rationale of the corporate strategy and ability to fit the mission of the firm.
On the other hand, feasibility refers to the organizations resource capability in the undertaking
of the corporate strategies. Lastly, Acceptability relates to the anticipated outcomes and
stakeholder expectations about the implementation of the strategies.
According to Wu (2010) suitability evaluates embraces analytical models like the Porters
five forces (Porter 1990), PESTEL Analysis as well as Porters Diamond theory. Ryanair, as a

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business enterprise going international, considers profile evaluation, portfolio analysis, value
chain analysis and other decision-making techniques such as sensitivity analysis and decision
trees. The uniqueness and dynamics of the business environment call for effective
contextualization of the evaluation in the light of the organizational goals.
In its internationalization strategy, Ryanair requires an extensive suitability analysis of the
Australian market as well as the goals of the organization in the global provision of quality
services to the culturally diversified customers. The PESTEL analysis, for instance, seeks to
understand the political climate, environmental regulations such as emissions and the social
setting and cultural diversity of the Australian nationals. It also evaluates the technological
requirements to deliver effective services, the general economic conditions and the legal
environment in the business operations (Pellegrino& McNaughton 2015)
According to Rowlison et al. (2014), the feasibility evaluation assesses the international
capabilities necessary to implement corporate strategies. Inadequate resource and capability
undermine the cross-border growth strategies of an organization. Fung (2014) the resource-based
theory is a critical consideration in the establishment of the cross-border business ventures. The
theory views the organization in the form of the collection of capabilities. The internalities of
Ryanair such as low-pricing and resource outlay are critical in the formulation of the crossborder strategic intent. The resource-based view is inward-looking and criticizes models such as
Porters five forces that majors on the organizations externalities.
According to Szymaniec-mlicka (2014) the resource-based view holds that an
organization becomes more feasible in using its prevailing resources to exploit more
opportunities than rely on new skills each time and opportunity arises. According to Johnson &

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Scholes (1999) Ryanair could use both the tangible assets like capital and equipment and
intangible assets like its outstanding brand reputation, corporate culture and trademarks to
conquer the Australian airline market. Moreover, Ryanair has had excellent performance in the
European market and consequently renowned as a low-priced and no-frills airline. Such
capabilities will help the Australian SBU grow substantially over a short period.
According to Yang and Lin (2008) feasibility studies have supported contemporary
business leaders in designing ideal business process models to further their organization's
expansion plans. Feasibility analysis incorporate models such as the 6M model (Money,
Machinery, Manpower, Markets, Materials and Make-up). In the monetary perspective, the cost
of financing the corporate strategies is essential. The inclination to the domestic borrowing
could be detrimental due to the volatile economic conditions. Organizations should critically
consider the availability of manpower, regarding skilled manpower. Its leaders should carry out
an in-depth market evaluation using five force model or PESTEL factors. Materials relate to
reliable supplier relations whereas makeup refers to the organization structure and culture of the
new SBU in the foreign market (Mehmood, 2015).
The acceptability approach entails the expectations of the shareholders as well as the
financial implications of the business strategies. The management ensures that the strategies
formulated to enter into new market results in economic viability. According to Baccaro and
Mele (2011) stakeholders are continually aware of the quality of governance in the multinational
enterprises.
Cheng et al. (2014) assert that shareholders have a concern with the risk of return
profile. It means that Ryanairs corporate-based strategy to invest in the Australian market should

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be in the best interests of the stakeholders. Business strategies should aim to get the most out of
the value of the shareholders (Nortili & Wong, 2014). Wu (2010) affirms that the interests of
stakeholders such as of unionized employees greatly affect the airline industry. Fundamentally,
every passing minute while employees are on industrial action causes losses in millions of
dollars to the airline companies.
According to Horton (2014), successful expansion projects call for effective relationships
between the organizations management and the stakeholders. The Mendelow Power Matrix is
widely used to gauge stakeholder relationships in such scenarios. The power-interest matrix is
appropriate to help Ryanair establish whether stakeholder resistance could be an inhibitor in the
managements implementation of a business strategy and thus formulate needed interventions.
Some of the warning signs of stakeholder resentment include withdrawal of labour, dismissal of
directors, increased resignations, and increased litigation and remuneration problems among
others. According to Mohan & Paila (2013), stakeholder mapping plays a crucial role in
numerous organization's strategic plans
The SAFe criteria postulated by Johnson et al. (2014), is of unlimited importance to
organizations that decides to heighten their business operations to greater levels. According to
Ryanair Holdings Plc (2015) the Dublin-headquartered firm can effectively employ the SAFe
criteria in establishing not only the appropriateness to develop the strategy of moving into the
Australian market but also the resource-based self-evaluation and potential consequences of such
an investment. Malighetti et al. (2010), through empirical research, ascertain that Ryanair is a
low-cost carrier, and the prospects of growth of the organization are evident.
The Strategic HR Management in Global business

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According to Muritiba et al. (2010) the comprehension of human resource strategies is

the form of policies such as staffing, performance appraisal, compensation and retention among
others. The selection and implementation of such workforce-based policies affect the
performance of an organization. Many human resource scholars concur that the cross-border
human resource management has become a complex phenomenon. The multinationals such as
Ryanair, need to uphold the global Human Resource policy standards. Another issue influencing
the Human resource policies is the autonomy levels. The management needs to make the
decision on whether to centralize policies from the headquarters or follow a decentralization
trend.
According to Rao and Krishna (2015) HR strategies cannot operate in isolation of the
organizational objectives. Darwish & Singh (2010) highlight that the birth of strategic human
resource managers has driven multinational enterprises to tailor human resource needs to
organizational culture and organizational performance. Mcclean and Collins (2011), argue that
HR managers are in a continuous process of maintaining a high correlation between the
organizational productivity and high-commitment human resource practices. Ryanairs HR
practices like job recruitment, selection and incentive practices should foster long-term benefits
of the employees to the organization.
According to Hofstede (2015) a number of components are vital in understanding cultural
diversity. In the power distance aspect, Australia with a score of 36 has hierarchies that are
convenience and managers involve employees in consultation. In Ireland, the score is at 28
meaning that participation of employees in management is also visible. However, Australia has a
more individualised society with a score of 90 in comparison to Irelands 70 (Hofstede, 2015).

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Both nations have an almost equal value in masculinity whereby achievements bring about pride
and conflicts are resolved at individual levels.
Ireland has a lower score on uncertainty avoidance in comparison to Australia.
Consequently, it implies that Australian enterprises embrace creativity and ideas on a wider scale
than Ireland. However, Australia has a higher scale on long term orientation than Ireland. The
respect to traditions, the propensity to saving and focus on short term goal achievement is lower
in Australia compared to Ireland. The cultural analysis for the two countries above aids the
Ryanairs leaders make sound decisions that could affect the cultural organisation of the
Australian people.
Ryanair will need to develop the HR management practices to suit the Australian
workforce. According to Muduli (2012) the interaction between the HR practices and the
corporate strategy is an essential factor in achieving organizational effectiveness. HR studies
have established that appropriate human resource diversity management practices generate
positive employee outcomes that favour organizational effectiveness. The human resource
practices at Ryanair should embrace cultural diversity should the firm decide to take its
operations to the Australian market.
One of the essential considerations will be the diversity of employees in Australia. The
ethnic composition is different from that in Ireland. According to Manroop et al. (2014) the
employee cultural diversity affects the firm's ethical landscape. The Ryanair HR managers
should be complacent with the Australia's cultural variations. Evidently, the values, norms,
beliefs and religious affiliation of the Australian workforce is not identical to the Irish workforce.
Since the mobility of labour in the international business environment is fairly rigid, the human

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resource manager heavily relies on the domestic-supplied workforce in achieving the goals of a
foreign business enterprise.
The resource-based view holds that human resources directly influence the performance
of the organization (Manroop et al., 2014). Ryanairs HR strategies should recognise the
diversity and be inclusive of the minority groups. The human resource policies are
internationalized to reflect the global standards. Managers should envision this requirement as an
opportunity as opposed to an affliction. The globalization of the Ryanair human resource
practices is a shield against the Australian trade union provisions and those of the World Labour
Organization. The performance alignment embraces the strategic human resource management
theory (Nankervis et al., 2012).
According to Mitchell et al. (2013) the SHRM theory holds that appropriate alignment of
human resource management practices with the business strategies yields high organizational
performance and high competitive advantage. The HR professionals at Ryanair should consider
embracing of the High-Performance Human Resource Practices (HPHRPs). According to
SuttaPong et, al. (2014) the HPHRPs approaches entail high-value HR practices that create more
participation and high level of involvement of employees that promote organization's strategies,
mission, and the organizational culture.
Such practices include among others provision of continuous training opportunities to
sharpen employee skills, job rotations, undertaking the performance appraisals, provide career
opportunities and grant job security. The practices will enhance the communication system, and
freer communication is health to any organization. As a resultant factor, the employees acquire

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the feeling of safety and security and are thus greatly motivated to pursue the goals of the
organization.
According to Yu (2013) the HPHRPs are essential in the swiftly changing environment.
Fundamentally the airlines industry is a dynamic field characterized by volatile markets,
changing economic conditions and fuel fluctuations. The HPHRPs thus support the
entrepreneurial theory and truly support the diverse workforce to improve the entrepreneurial
performance. Prieto & Santana (2012) reshapes the social climate and promotes ambidextrous
learning in the organization. The favourable social climate aids the employees adopt suitable
workplace behaviours and encourage a general trend towards goal achievement. The HPHRPs
will help Ryanair manoeuvre the dynamics of Australian trading environment.
According to Wei (2015) the HPHRPs facilitate suitable relationships between the
Ryanairs employees and the HR department. Additionally, they minimise conflicts between the
two parties. Ryanairs HR practices should brace to counter the Australian trade unions to
downplay the conflicts. International HR studies have revealed that HPHRPs weaken the chances
of turnover the by human capital.
According to Ayree et al. (2007) HPHRPs create a suitable environment with which
employees can voluntarily and willingly take part in the implementation of the business
strategies. In Australia, Ryanair should imitate such ideologies. The HPHRPs approach will
substantially support Ryanairs business strategy of entering the Australian market through the
participative workforce. The Ryanair HR managers should express the willingness to forego the
conventional HR practices and embrace the strategic human resource practices so as to
strengthen the airline brand reputation, sustain a robust organizational culture and continually

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accept the essential role of the culturally diverse human capital in the achievement of goals and
objectives.
Conclusion
The increasing concern for international business has prompted many business
enterprises to engage in the cross-border business. International business has resulted in the
adaptation of business management strategies that aim at the creation of competitive advantage
over the foreign business enterprises. The report has evaluated a variety of aspects that
characterizes the international business in Australias SBU such as cultural diversity,
international competition, regulatory environment and the financial climate. The report has used
porter's diamond theory to explain competitiveness of firms in new regions. The model has four
conditions that explain competitiveness, namely home demand conditions, factor conditions,
industry structure and related and supporting industries. Additionally, the report has analysed
porter's improved theory, the five partner's theory. The theory advocates for the development of
robust networks with clients and suppliers in the cross-border business so as to earn a
competitive advantage.
The report has also analysed Johnson and Scholes model of Suitability, Acceptability,
and Feasibility to explain the setting of viable business strategies that fit organization's mission
and are within firm's resource constraints. Lastly, the report has highlighted the effective human
resource strategies that HR professionals incorporate to ensure the effectiveness of international
business operations. The report has identified and analysed High-performance human resource
practices and their significance in aligning the diverse workforce towards the corporate strategies
so as to enhance the productivity of skilled labour and performance of the firm.

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Recommendations
After the in-depth analysis, the report puts forward several recommendations for Ryanair
Ltd in its strategy of establishing a strategic business unit in Australia.
Considering the internal scanning (SAFe criteria) of Ryanair makes it worthy to pursue
the corporate expansion strategy. The strategic plan squarely fits in the organisations mission.
The feasibility analysis proves that the organisation has the resources and capabilities to pursue
the strategic plan. The strategic plan relatively acceptable since the Australian market is an ideal
market and thus full of promise to the viability of the strategic plan.
Similarly, the report strongly recommends that the Ryanairs HR professionals to
incorporate the strategic HR policies in the Australian business unit. The HPHRPs are essential
in developing long-term benefits to the employees to the organisation. The Ryanair HR
professionals should take a global approach to the HR practices since they will be dealing with a
highly culturally diverse workforce in foreign trade unions.
In addition, the organization should embrace the five partners model of Johnson and
Scholes. Through the model, the firm will establish strong trading networks with clients,
suppliers and other potential partners. The networks will enable Ryanairs SBU to be a learning
organization and thus adaptive the international business environment. They will guarantee the
rapid success of the SBU through collaborative operational partnerships. Consequentially, the
SBU will swiftly gain trust among clients and suppliers that is favourable for new markets.
In finality, the organization should carry out a detailed PESTEL analysis of the external
forces that have the potential of affecting the business operation of the strategic business unit.
The management of Ryanair should take a closer look at the external determinants in the

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business operations. The management should carry out continual analysis of Australias changing
economic and regulatory environment, trends in tourism, domestic jet fuel prices, environmental
protection laws, and technology transfer among others. The in-depth knowledge of these factors
will improve the firms performance in the new market.

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