Jet Blue in the United Kingdom Research Paper Example | Topics and Well Written Essays - 1000 words

Jet Blue in the United Kingdom - Research Paper Example As an MNE, Jet Blue also services Aruba, The Bahamas, Puerto Rico, Mexico and Bermuda. Jet Blue is able to compete with much larger U.S.-based airline companies such as American Airlines as the business has been able to shed much of its high operating costs related to supply chain and fleet management by maintaining a lean operations methodology (Jet Blue, 2011). Price reductions in the form of lower and competitive ticket prices are accomplished through its lean business model that makes Jet Blue an attractive alternative to high-frills airline companies. A country where Jet Blue does not have market presence is the United Kingdom, a generally attractive market for foreign direct investment by the organization. The United Kingdom maintains a significant airline infrastructure that will assist Jet Blue in establishing a centralized hub in order to serve the UK market effectively. Major renovations to such airports as Heathrow International have provided more traffic space and feasibi lity for structured and timely arrivals and departures. Alongside the infrastructure exists recent government deregulation of the airline industry that had once controlled pricing and established anti-monopoly legislation by major carriers. This has removed some of the financial and regulatory barriers to new entry by airline competitors, making the United Kingdom a viable market for direct investment. Another advantage of investing in the United Kingdom is the economic environment. Currently, the United Kingdom still measures its currency against the Pound Sterling, a method of isolating volatility and risk associated with the current Eurozone economic crisis related to the Euro. The UK Pound Sterling is currently worth $1.61 as compared to a single U.S. dollar. Jet Blue currently has established a very viable and well-developed supply infrastructure within the United States, giving it many comparative advantages in relation to procurement. By investing in the United Kingdom, Jet B lue can establish a moderately higher pricing structure that is comparative to the British Pound Sterling, providing profit opportunities of approximately 60 percent, especially when moving materials procured in the United States into the foreign UK market where import pricing risks are dramatically reduced compared to this much higher-valued Sterling currency. Procurement costs for on-board operations management will be fundamentally less expensive than in the United States if not procured domestically in the United Kingdom. There is, however, a significant disadvantage to entering the United Kingdom for direct investment. There are currently many different low cost carriers, such as RyanAir and Air Asia, that provide similar low-cost and low-frills options for consumers and business travelers. Deregulation occurring in the last few years has removed entry barriers to these companies that now have high cash flow and considerable positive brand reputation with price sensitive consum ers. Even Virgin Airlines offers similar low-cost methodology allowing this carrier and those such as RyanAir and Air Asia to have comparative and competitive advantages in pricing and quality. Jet Blue is not a well-known brand name in the United Kingdom which could provide much higher cost allocation toward the promotional function (such as advertising and online marketing) in order to compete in this dynamic competitive market. Minimizing foreign exchange risks is not that complicated for Jet Blue, considering the currencies regularly traded in this market. The Euro and the Pound Sterling are both valued much higher than the