Business to Business Marketing Gulfstream Aerospace Corporation
"The flattening of the corporate organization requires key managers and leaders to travel. These executives are giving all their time and the company is enhancing its investment with improved time of travel using business aircraft,"- Gulfstream Aerospace Corp.
In today's business scenario, leadership teams are shrinking. That means fewer people make the business happen. High salaries make executives' time cost a major concern - shareholders get mad if the executive gets paid big dollars and he doesn't deliver. The cost of wasted travel time becomes a significant issue. Businesses are penetrating areas where the airlines don't go without taking an extra day to get there. And, there is no question the economy is becoming more international. Getting to several destinations within a foreign region in a timely manner is important. That is especially true in marketplaces like the Pacific Rim, The Middle East and Eastern Europe.
Yet, there is acknowledged fear of the poor safety record of many international regional air carriers.
We are moving more and more into a market-driven economy. There is a proliferation of competitors. Personal contact makes the competitive difference. In emerging markets, personal contact by top-level executives is essential. Without that contact opportunities may be missed and management will make bad decisions. We can develop the response to the specific concerns of that customer. The conflict that today's leaders face is how to respond in a market- driven economy and run the business and that requires time and mobility . And hence the need of reliable, cost effective as well as convenient mode of travel to far off places having less or even no connectivity is of prime importance.
WHEN AND WHERE - THE VALUE OF BUSINESS AIRCRAFT
There are two basic kinds of business aircraft use: strategic and operational. Strategic trips have high risk or reward opportunities. Strategic trips often include customer interface and typically have extraordinary time pressures associated with them - to the point that travel costs are lesser importance in comparison to the potential outcome.
In a strategic situation the aircraft is much like a fire truck. It gets the right people where they need to be when they need to be there. Strategic value is not measured in miles traveled or in number of passengers carried. The value is in creating the desired outcome.
On the other hand, operational trips are usually part of running the business. Total door-to-door cost is a strong element in deciding the mode of travel for operational trips. Business aircraft are routinely cost effective on operation trips that include several medium-to-high-cost people going to multiple destinations over a one-or two day period. Business aircraft can also be very cost-effective on regional out-and-back trips to destination not served directly by the airlines.
The tangible and intangible value of travel can be understood by looking at its five primary factors (in typical order of priority):
BUSINESS AIRCRAFT SERVICES OPTIONS
There are three basic ways for companies to get the business aircraft services they want. Two are traditional: aircraft ownership - in a variety of forms - and charter. The third has blossomed during the past few years: fractional aircraft ownership. Ownership of aircraft provides the greatest control of the asset and its services are to the company's specifications. Those services are most often provided by an internal flight department staffed by company employees.
Occasionally two or more companies will enter into a shared ownership and operation of an aircraft. This ownership arrangement is not unlike sharing ownership of, say, a mountain cabin. For it to be successful, it requires that the attitudinal and usage patterns of the participants by complementary. There are tax and operational technicalities that must be address for this option to be done without dramatic surprises.
The second most frequent source of business aircraft services is charter flights. Charter is very flexible and can be especially effective in supporting specific purposes. Less connectivity to many emerging markets like eastern Europe renders the commercial flights a highly unlikely mode for the business traveler. Several reputable companies have geared up to meet that need. Global Aviation, based in Singapore, is working closely with China Southern Airways to provide access to 80 destinations within the People's Republic of China. In 1996, Jet Aviation opened full-service facilities in Singapore. Dassault Falcon Jet is also involved in Hong Kong-based charter services that support Pacific rim business travelers.
The other main concern about using charter services is the cost. Charter services are usually more expensive than the airlines or the use of comparable business aircraft for a specific trip. However, they are a lot less expensive than owning an aircraft for a hundred hours or so of use per year.
The third business aircraft access option is the fastest-growing segment of business aviation: fractional aircraft ownership. Fractional share ownership is what its name implies: You can buy as little as an eighth of an aircraft, with an allocation of 100 passenger hours of use. The costs include the initial capital investment, monthly fixed charges and per-flight-hour charges.
In view of the above stated needs of the consumer, the Gulfstream Aerospace plans to Expand in east and Southeast Asian markets including marketing strategy for the company. They have a vision to become the market leader in Asian market
Roadblock: Economic crisis in the Asian market. After the Asian crisis, international investors were reluctant to lend to developing countries, leading to economic slowdowns in developing countries in many parts of the world. The powerful negative shock also sharply reduced the price of oil, which reached a low of $8 per barrel towards the end of 1998, causing a financial pinch in OPEC nations and other oil exporters. Such sharply reduced oil revenue in turn contributed to the Russian financial crisis in 1998, which in turn caused Long-Term Capital Management in the United States to collapse, after losing $4.6 billion in 4 months. A wider collapse in the financial markets was avoided when Alan Greenspan and the Federal Reserve Bank of New York organized a $3.625 billion bail-out. Major emerging economies Brazil and Argentina also fell into crisis in the late 1990s.
Hence the number of businessman with the capability of affording the high capital cost of owning a jet was reduced. Along with the affordability, knowledge about the business jet and their usage was also a major roadblock in growth of business jet in Asian market.
Opportunities for Gulfstream:
Expected growth in new millennium and market recovery in these regions.
Shifting demand from first or business class to corporate owned jets.
Problem with domestic flight services especially in US, Middle East and Latin America such as poor connectivity, inconvenient scheduling of flights, long waiting times and few alternatives form of travel.
Increase in the number of billionaires.
An important precursor for the growth of business aviation in Asia is the improvement in airport and airspace access.
Increase in general domestic air traffic which means better understanding of aviation travel.
Small market base
Volume of transaction
Frequency of transaction
They Offer a whole family of products and services from comprehensive management and services system to flexible financing and leasing
Delivering superior aircraft with advanced capabilities
Other options for customers:
Service via airlines
Service needed for the consumer:
Level of service
Joint ownership, co-ownership or a fractional share
Business jet is most cost effective for above 200 flight hours annually and number of travelers is from 7 to 19.
Main products Gulfstream:
the Gulfstream IV-SP
the Gulfstream V
The Share program
Dassault Falcon Jet Corp
Knowledgeable, high income business man and sophisticated.
Executive: actual end users. No technical knowledge. Business jet as a symbol of success. Price insensitive but concerned of operating cost.
Aviation: Corporate flight departments of executives and independent specialized consultants. Getting value for each dollar spent.
Why Asia Pacific market:
Asia-Pacific region is continuing to grow in importance in the regional and business aircraft markets, and China has forecasted to become one of the world's key aviation markets over the next 20 years
"The Pacific market place has enormous potential for growth," says Dave Sheehan, retired head of worldwide air travel services for Mobil Oil and newly appointed CEO of Singapore-based Global Aviation. "The projection is for a near-term 23% annual growth rate in Southeast Asia and the People's Republic of China."
New strategies for Gulfstream to fulfill its expansion plan:
Focus strategy: Focus on Company specific requirements viz. able to run on small runways.
Flight share program so as to give ownership to customers without investment in hangar facilities, equipment and flight crew personnel.
Should worked closely with a range of regional regulatory bodies, investors, airlines, airport operators, industry associations, and the technology and aerospace manufacturing communities
Provide better services to create better brand image.
Strategic alliance with local manufacturers and suppliers to bring down the cost. Introduction of micro jet to have cost reduction. To succeed, the new light jets can choose either of two paths. First, they can seek to be part of a new air taxi service partner. Yet this is a difficult prospect. Any such service would need to start with hundreds of planes and scores of bases to avoid flying money-losing "deadhead "flights-non-revenue- producing trips incurred by the need to fly clients to locations where there might not be another client waiting for a plane. The alternative option is for the company to realign their cost assumptions with the more modest owner-operator market. But those who pursue that path will find that their advertised prices will rise considerably. The current prices assume mass production, which is unachievable with a sole reliance on owner-operators.
Fractional ownership is a good option in Asian markets. Margins in this segment of the aviation industry tend to be higher than the other segments, but this is changing. Much of the industry's growth has been due to fractional ownership companies, which are better able to exert pricing pressure on manufacturers. This pressure will increase if the fractional industry restructures and as manufacturers strive to retain market share.
Special focus and support to advertising and promotion as company is venturing in a new market in a high competitive environment so as to increase the visibility, brand strength and attitudinal preferences
The market development and product development strategy for the company should be synchronized as it is entering new market with completely different customer profile.
Introduce new aircraft that cater to the full range of operator needs
Steps should be taken to become Original Equipment Manufacturer by offering aircraft in most business jet markets
Business charter program will be a good option for Gulfstream
The range and aircraft size constraints in Asia pacific region can be dealt by introducing aircraft, designed specifically for the lower end commercial market. It should be positioned to replace many of the aging narrow-body aircraft presently in service in the Asia-Pacific region. This family of aircraft will offer Gulfstream the opportunity to grow their networks with increased frequency and more point-to-point operations into markets that are not well served
Technology and new product development is essential for Asian market penetration
The use of corporate aircraft as a business tool is just starting to take off in the Asia Pacific region, and the growing interest we see from individuals and corporations, and particularly increased interest from airlines in this sector, is confirmation that there is a wealth of opportunity for business aircraft manufacturers, and the key companies that support this dynamic sector of the industry. Certainly there are challenges in a market which is still in its relative infancy, but there is recognition that to be in the market you need to be in early, and be willing to take a long term approach to the business
As margins come under pressure in future, it will be more difficult to fund all-new models for the company. It would have to restructure as its relative power erodes due to market concentration by the fractional, yet it is very difficult to see any obvious industry endgame.
Many new players are seeking entrance to this market through the low and very low end where there are fewer barriers to entry. Embracer's long-term prospects are superb, but every other new aspirant faces an uphill battle. One or more high-profile failures could send an investment chill through the industry.
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