Andreas Savva 6A
Discuss whether a joint-venture is necessary for AirAsia to enter the Chinese
market for low cost air travel
A joint venture is where a separate business entity is created by two or more parties. It
involves sharing ownership, returns and risks of the new project or other business activity for
which the joint venture was set up. It is debatable whether AirAsia should do a joint venture.
According to the extract, “AirAsia, the Malaysian low-cost airline, is planning to enter China in a
joint venture with the government of Henan province and Everbright, the state-owned
enterprise”.
Joint ventures such as this one have several benefits that highlight how joint-ventures are
indeed necessary. An initial advantage is that the local firm can get access to better resources.
This can be seen in the extract when it says, “China is suffering a severe pilot shortage, it has
been said, which explains why AirAsia intends to build its own flight school in Zhengzhou”.
Forming a joint venture will give the domestic firm access to better resources, such as
specialized staff and technology. All the equipment and capital that are needed for the project
can now be used. In this case, since there is a pilot shortage, the pilot school AirAsia is planning
to build would give access to Everbright to specialized staff such as pilots. This shows how a
joint-venture is indeed necessary. A second advantage is that both parties share the risks and
costs. As mentioned in the extract, “While China may be a very profitable market, analysts have
warned that it is a risky market for AirAsia”. In case the joint-group project fails, they are not
alone when bearing the costs of its failure. Due to the nature of China’s market, there are
several risks that come with setting up a joint-venture. Nevertheless, if the joint-venture were
to fail, both Everbright and AirAsia would not solely experience the costs, highlighting how a
joint-venture is needed. A third benefit that showcases the positive nature of joint ventures is
that firms can gain new insights and expertise. Considering that “budget airlines have hardly
managed to enter the market so far”, AirAsia could use this venture as an opportunity to gain
new insights and expertise. Through their co-operation with Everbright, the market now is
easier to understand and navigate given the short-term partnership they have forged. This
indicates that a joint venture is very much beneficial and needed. Therefore, joint-ventures
have multiple benefits that make them necessary for AirAsia to join the Chinese market.
Even though joint ventures have positives, there are downsides and negative aspects to them.
Firstly, one disadvantage is that there might be a clash of cultures. As the source mentions,
AirAsia has faced state-owned airlines in South East Asia where the airline comes from over a
period of fifteen years but navigating the Chinese market with Everbright might be difficult due
to the differences in their operations and cultures. Such a clash of cultures and management
styles may result in poor co-operation and integration. People with different beliefs, tastes and
preferences can get in the way if left unchecked, emphasizing the negative aspects of joint-
ventures. Furthermore, unreliable partners are another drawback of joint ventures. The source
Discuss whether a joint-venture is necessary for AirAsia to enter the Chinese
market for low cost air travel
A joint venture is where a separate business entity is created by two or more parties. It
involves sharing ownership, returns and risks of the new project or other business activity for
which the joint venture was set up. It is debatable whether AirAsia should do a joint venture.
According to the extract, “AirAsia, the Malaysian low-cost airline, is planning to enter China in a
joint venture with the government of Henan province and Everbright, the state-owned
enterprise”.
Joint ventures such as this one have several benefits that highlight how joint-ventures are
indeed necessary. An initial advantage is that the local firm can get access to better resources.
This can be seen in the extract when it says, “China is suffering a severe pilot shortage, it has
been said, which explains why AirAsia intends to build its own flight school in Zhengzhou”.
Forming a joint venture will give the domestic firm access to better resources, such as
specialized staff and technology. All the equipment and capital that are needed for the project
can now be used. In this case, since there is a pilot shortage, the pilot school AirAsia is planning
to build would give access to Everbright to specialized staff such as pilots. This shows how a
joint-venture is indeed necessary. A second advantage is that both parties share the risks and
costs. As mentioned in the extract, “While China may be a very profitable market, analysts have
warned that it is a risky market for AirAsia”. In case the joint-group project fails, they are not
alone when bearing the costs of its failure. Due to the nature of China’s market, there are
several risks that come with setting up a joint-venture. Nevertheless, if the joint-venture were
to fail, both Everbright and AirAsia would not solely experience the costs, highlighting how a
joint-venture is needed. A third benefit that showcases the positive nature of joint ventures is
that firms can gain new insights and expertise. Considering that “budget airlines have hardly
managed to enter the market so far”, AirAsia could use this venture as an opportunity to gain
new insights and expertise. Through their co-operation with Everbright, the market now is
easier to understand and navigate given the short-term partnership they have forged. This
indicates that a joint venture is very much beneficial and needed. Therefore, joint-ventures
have multiple benefits that make them necessary for AirAsia to join the Chinese market.
Even though joint ventures have positives, there are downsides and negative aspects to them.
Firstly, one disadvantage is that there might be a clash of cultures. As the source mentions,
AirAsia has faced state-owned airlines in South East Asia where the airline comes from over a
period of fifteen years but navigating the Chinese market with Everbright might be difficult due
to the differences in their operations and cultures. Such a clash of cultures and management
styles may result in poor co-operation and integration. People with different beliefs, tastes and
preferences can get in the way if left unchecked, emphasizing the negative aspects of joint-
ventures. Furthermore, unreliable partners are another drawback of joint ventures. The source
