SL paper 2, section C, sample E

SL 6. With reference to one or two organizations that you have studied, evaluate different
strategies businesses can adopt to respond to issues of globalization.

My chosen organizations are the two airlines British Airways and Easyjet. Although they are based in
Europe, they are good choices here as they have to respond to issues of globalization (in the sense of:
international competition, liberalization of the market, increasing power of the consumers thanks to the
internet, the world becoming a small place). In that dynamic context, British Airways and Easyjet have to
plan and implement (long-term) strategies – and we can already see the challenge, as strategies are like
“set in stone”, once decided and written in business plans, typically for 5 years, whereas globalization is
all about speed of change, flows of people/capital/ideas and “here today, gone tomorrow” (like an air
plane!)

Despite the impression that senior managers could choose between hundreds of business strategies,
Mister Ansoff showed in his famous matrix that ultimately only 4 options exist:

• Market penetration
• Product development
• Market development
• Diversification

We will now examine each business strategy in turn, examining what it means in the context of
globalization, with reference to British Airways and Easyjet (and both their current strategies and
possible future strategic decisions).

Market Penetration

Market penetration is relevant for a company (for example British Airways) well established in its market,
offering the same product (flights with a range of services such as corporate lounges and business class
facilities) to the same customers (business people, wealthy people). Here promotional marketing is the
key, for example with its latest campaign “To fly, to serve” BA wants to reinforce the message that it’s an
old company faithfully serving the British public (so saying “we’ve been loyal to UK travelers, UK
travelers should be loyal to us”).

Market development

Market development is about targeting new customers, so in the case of Easyjet it is targeting potential
travelers in countries where Easyjet is not operating yet. At the moment, Easyjet does not offer flights
from Romania to other places in Europe – so a form of market development for Easyjet would be to start
operating from airports in Romania (Bucharest). The new market is Romania, which is a good example
of globalization, as Romania is now in the EU. Easyjet has probably planned that already, so it is
realistic.

Business management teacher support material 1

 SL paper 2, section C, sample E

Product development

Product development is about new products; in the case of Easyjet, they have now created Easycruise,
a budget cruise line based on the same principles as Easyjet. The market is the same (budget-conscious
travelers who don’t care about extra services), but the product is new (a cruiseship with minimal
facilities).

Diversification

Diversification is the most risky strategic option, so businesses rarely go for it. For BA, it would mean
selling new products to new customers, for example opening UK-themed restaurants or schools in South
America. It could work (if they use the image of quality and Englishness) though I would not recommend
it, especially as globalization means hyper-competitition, and they don’t know the markets and the
products well, although they can do a lot of primary and secondary market research.

For customers, all these strategies are good, as it means that they can access more products and
services (for example Romanians who want to travel to England with Easyjet would be cheaper than with
British Airways). For shareholders, all these strategies are good, though diversification is more
dangerous and they could lose their investment if the strategy fails. For societies, all these strategies are
good too, as they bring people closer together (especially in the case of airlines!) but globalization can
also mean a loss of national identity and culture.

In conclusion, we have seen that all companies have 4 types of business strategies (market penetration,
product development, market development and diversification), it’s called the Ansoff matrix. Since the
dawn of time, it has been the case, it is a universal model, but globalization makes it even more
important and difficult, as companies compete more and more, and must keep innovating to beat all their
international competitors.

Business management teacher support material 2