“Over the past few months there were a lot of people talking about the death of the Asian strategy...This shows the Asian strategy is alive and well, and when the deal is right we’ll do it,” Qantas CEO Alan Joyce said at the launch of Jetstar Hong Kong this week.
Australia’s national carrier announced that it has entered a joint venture partnership with China Eastern to expand its operations in the high growth Asian region.
The new venture will begin flights next year in what looks like a very well considered move to tap the booming Asian travel market. The travelling middle class of China is set to grow from 300 million to 700 million over the next decade and Jetstar Hong Kong will be the one carrying them around. “It’s all about first mover advantage” Joyce says.
For the flying kangaroo it’s a huge turnaround after a year of industrial action headaches, declining profitability and failed talks of expansion. It's not the traditionally secure state a business should be in before expanding into a new market, which often comes with its own host of costs and dangers.
On top of this, it has recently been claimed that the introduction of Jetstar actually goes against Hong Kong's constitution which prohibits foreign aviation ventures settling in the Asian hub. Andrew Pyne, former budget airline chief, has spoken up about Hong Kong's regulations which would need to be changed in order for Jetstar Hong Kong to begin flying, something it hasn't done for plenty of other airlines trying over the years to make Hong Kong their Asian base.
So putting aside the potential constitutional barriers, how did Joyce and his team do it? And, importantly, what can be learnt from Qantas’s coup that can be applied to your entity’s industry leading expansion?
There are two chief aspects of the move that should be at the forefront of every company’s expansion plans.
1. Team Up
Two is always better than one. By teaming up with China Eastern, Qantas will split the capital outlay, risk and reward of the new venture. They will also be able to tap some invaluable expertise and access to the booming market.
Not only is a joint venture a great way to expand business operations for cost-cutting and risk mitigation purposes, but also the implied trust it creates. For existing China Eastern customers and those familiar with the brand, Jetstar is being endorsed as a quality and trusted operator. That sort of customer access is invaluable and makes any foray into a new market so much more likely to succeed.
Even if it isn’t an investment sharing joint venture, collaborating on marketing and promotions with existing operators in a new market is a great way to ‘fit it’ and spread your product.
2. Latch onto the Latest Trend
Latching on the latest trend before your competitors is at the centre of innovation and key to building a flourishing business. In establishing Jetstar Hong Kong, Qantas has recognised the huge growth on offer in Asia and jumped at the opportunity to establish itself as the leading Australian operator in the region before other domestic airlines do.
This doesn’t mean leaping into any new opportunity without consideration for the direction and strategy of the existing business. It’s about adding another string to what is hopefully an already strong operation.
Qantas looked at several options before settling on Hong Kong. “The deal wasn’t right in Malaysia, it wasn’t right in Singapore, but this deal with China Eastern is the right partner, in the right market, at the right time.” Joyce said of the move.
By getting on the Asian bandwagon early in the middle class boom, Qantas has latched onto a travelling trend in a timely and well considered way. It’s been so well thought out that it’s hard to see how they can go wrong.
Of course to undertake such an expansion, your business also needs to be in a strong financial and operational position. As Joyce boasted of Qantas’s foray, “The fact is we have a model ready to go. It’s a fact we have the aircraft on order. We can move faster than anybody else.”
It’s also really important to get the right advice on your expansion. While it’s easily done with the advisors available to a commercial giant like Qantas, great advice isn’t out of reach of SME’s either thanks to Austrade.
To fill you in, Austrade’s a great free advisory service providing on-the-ground advice and support to Australian businesses looking to expand abroad. Introductions to prospective partners and clients, access to market decision makers, grants and ongoing business services are all wrapped up here. Your taxes pay for the service so be sure to utilise it.
With the power of team work, the ability to spot a trend and a little government assistance the possibilities for your business are expansive and endless. Just like Joyce says of Qantas, “We have capability of doing much more than we’re doing today.”
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