The Current And Potential Use Of Knowledge Management Within The Airline Industry - Essay Example

? THE CURRENT AND POTENTIAL USE OF KNOWLEDGE MANAGEMENT WITHIN THE AIRLINE INDUSTRY of the school: Date: Table of contents 1.0 Executive summary 3 2.0 Introduction 4 3.0 Industry analysis 5 4.0 Present exploitation of knowledge management in the Malaysian Airline Industry 9 4.1 Information communication technology (ICT) 9 4.2 Organizational learning 10 4.3 Knowledge sharing 11 5.0 Strategies for future use of knowledge management 12 6.0 Conclusion 14 7.0 References 15 1.0 Executive summary Knowledge management is a strategy for all industries wishing to gain advantage over their rivals where they are required to employ various aspects of knowledge generation and knowledge sharing (Al-Hawamdeh 2002). The use of the information and communication technology was found to be very vital as an aspect of knowledge management among others. The report was conducted with regard to the airline industry which has a wide application of Knowledge management due to its complex nature and very competitive environment. The various sectors of both AirAsia and the Malaysian Air travel industry were considered and the study research conducted on how they have strategized their operations in order to reap the good benefits of Knowledge Management (AirAsia 2007). The key aspects of Knowledge Management with concern to the airline industry included the information communication technology, organizational learning that involves collective approach towards gaining intellectual capital by the organization, and knowledge sharing that is done between various organizations and institutions either within or externally to acquire better skills and knowledge (Christensen 2007). An industry analysis was conducted and it was clear that the Malaysian Air Services is an oligopoly. Similarly it was found that the Malaysian Air travel operates on a differentiation strategy whereas the Air Asia operates under cost-leadership strategy whereby it is trying to reduce its operational costs (Holsapple 2004). A summarized table of the analysis was thus drawn. It was found out that ICT had been used in innovation, knowledge development and utilization and knowledge capitalization whereas organizational learning and knowledge sharing were so fruitful in improving the modus operandi and new business development for the two airlines. It was thus recommended that the AirAsia knowledge management practices needed to support their expanding business besides sustenance of its cost-leadership advantage and MAS would have to face challenges of its hybrid strategy of competitive pricing and differentiation that would in turn make its brand recognized as a five-star value carrier (Oxford Business Group 2007). 2.0 Introduction The term Knowledge Management is a diverse field though does not have a specific common definition throughout the universe. In a general sense this is the collective use of skills, principles, facts and rules embodied in a firm’s knowledge assets to add value to the organization by gaining competitive knowledge over other firms (Stonehouse and Pemberton, 1999).Knowledge Management is a prerequisite to successful operation by various companies in the current hyper-competitive and ever-dynamic environment where survival can only be a product of their ability to develop longing knowledge-based competencies which can be easily adapted (Nonaka, 1991).though it be difficult to manage, it is most likely that it is the most strategic organizational asset (Shepard, 2000) and is the dominant way of gaining competitive advantage. Knowledge can be classified as either generic or specific though to a certain degree specific knowledge is unique to the firm hence it is more likely source of competitive advantage and is the basis of main competences in comparison with generic knowledge which is even so necessary for business operation (Stonehouse and Pemberton, 1999).the airline industry with its very competitive nature, dynamic stance, complexity alongside its high dependence on knowledge management gives a perfect case of how knowledge management can be used to gain competitive advantage. Key concepts in this area include: Information and Communication Technology which includes the use of internet technology, web-based interfaces, intranets and portals that are key in Knowledge management {Chowdhury 2006). Organizational Learning is another key aspect since the organization learns as its individual members learn (Argyris and Schon, 1996) and this is dependent on the organizational culture, structure and infrastructure. Organizational learning is a continuous process aimed at acquiring knowledge and skills. Other key players in this discipline are intellectual capital. This includes the intellectual material in an organization which in this case includes skills, know-how, competence, stakeholder relationships and other organizational resources (Marzooqi & Mohammed, 2007). Knowledge sharing which is also a process that allows the use of available knowledge in order to transfer the knowledge, apply “knowledge management” to solve various problems in a safer, faster, and cheaper than it could have been otherwise possible. 3.0 Industry analysis Malaysian airline industry is described as one taking the structure of an oligopoly market. The airline is known to consist of only one Full Service Carrier (FSC) known as Malaysia Airline System (MAS). More on this, the Malaysian airline industry also consists of two no-frills carriers known as AirAsia and Firefly (Sinha 2001). Initially, the government had total control over the Malaysian airline industry. The industry was fully controlled by the Malaysian Airline System (MAS), which was in turn under the control of the state. All this was happening just before the market was given permission to open and put in operation the AirAsia and Firefly in the industry. This was done as a result of the “domestic liberation exercise” conducted by the government. Currently, AirAsia and Malaysian Airline System offers their services in totally different business models and this is due to the fact that they are operating under the generic competitive strategy created by (Beiske 2007). The Malaysian Airline System is designed to abide by the “differentiation strategy” and imposes as fare premium as its charges. This is attributed to the fact that MAS is a fully service carrier. On the other hand, AirAsia is designed to use a “cost leadership strategy.” This clearly indicates that the two i.e. Malaysian Airline Systems and the AirAsia operate from different strategic positioning (DeLong 2004). This typically account for their difference in relation to targeted market segments live alone customer value proportions (Franke 2004). The differentiating characteristics between AirAsia and the Malaysian Airline System is exhibited and well elaborated in the table below: Features of the products AirAsia (LCC) Malaysian Airline System (FSC) Brand AirAsia offer only one brand at relatively low charges MAS has a big extension of Brand which are based on the charges plus services. Charges It has a considerate charge structure which is 60-70% cheaper than those imposed by the Malaysian Airline System MAS has complicated charges which are depended on the structure plus yield management. merchandise It offers only one product and normally at low charges It offers a good number of integrated product Seating structure It has a free seating which is relatively small It has got seat assignments and a relatively huge pitch as compared to AirAsia Structure of class Has got a single class which normally has a high capacity MAS is made of two class and relatively low density as compared to AirAsia Check-in Has no tickets Also has no tickets but with a IATA ticket contract Quality of service to its customers The quality is generally low as it performs poorly The quality of its services to customers in relatively good and it also offers reliability Type of Airport It is mostly secondary Operates under a primary airport Allocation Provides online distribution and also direct booking Has direct booking, online distribution, and also travel agent Links It connects from point to point Provides connections through interlining, code sharing, and global alliances Usage of aircraft It highly utilizes the aircraft Its utilization of the aircraft is medium to high and exhibits union contracts In-flight AirAsia pays for the facilities MAS imposes flattering additional Time taken for a craft to make a turn Twenty five minutes It generally has a low turnaround due to poor congestion supplementary returns Exhibited in on-board sales and advertising This focuses majorly on the key product Activities exhibited in the operation The main activity is flying, unlimited to financial services, exportation, and tour operations Concentrates mainly on extensions encompassing maintenance activities and cargo transportation Table exhibiting exhibit a summary AirAsia and MAS’s key features (O’Connell & Williams 2005) With its main target being the budget leisure travelers and those having their travel for the first time, AirAsia managed to stimulate and take hold of “unrestricted air travel traffic” in the year 2001. Consequently, AirAsia gained a tremendous business growth and since then it has gotten into its hands a credible portion of South East Asian Countries (MAS 2007). AirAsia has now gained the greatest market in terms of passenger which lies at 6.5 million domestic passengers. Malaysian Airline System on the other hand has the lower domestic passenger count of 5.4 million. AirAsia success is attributed to its credible operation strategies that are the low charges strategy and the excellent market positioning. This has made it be termed as the market’s leading domestic carrier in the Asian airline industry. On the other hand, Malaysian Airline Systems has taken substantial time to make a turnaround of its business which was achieved recently despite it being an award-winning airline. Furthermore, MAS has had to struggle in terms of finance in the past. Again, this is attributed to its poor use of knowledge management. However, in pursuit of a better and secure competitive position in the days to come, MAS is enthusiastically embarking on a business transformation by implementing suitable and most appropriate strategies. Competition has emanated and has highly intensified between AirAsia and Malaysian Airline Systems following the desire to be the leading in service provision in the future. This is closely linked to the fact that the two are moving into one another’s core markets and their engagement in lowering prices and fares to attract their customers. This also involves the pursuit to improve services to customer and entice them to cling to them. For instance, AirAsia has taken the initiative to introduce a franchise sirline, and an “AirAsia X” in order to gain access to long routs and provide its services to the parties who need it. Defensively, Malaysian Airline Systems has also set up its own low cost charges and Firefly to counter the impact of AirAsia on its market (Thomas, 2007). However, these competition strategies signal a difficult experience for the two due to the fact that they both have to pass through tough tests on their way to the top. This is actually in addition to the unsettled conditions of operation in the entire industry. According to (Porter, 2001), the two airlines must acknowledge that to gain competitive advantage, they must execute operational effectiveness and have strategic positioning. 4.0 Present exploitation of Knowledge Management in the Malaysian Airline Industry 4.1 Information Communication Technology (ICT) The Information Communication Technology (ICT) on which the modern airline industry depends encompasses the use of computer reservation system (CRS), the Yield Management System (YMS) and also the Enterprise Resource Planning System (ERP) (Tsui 2006). These ICT systems are highly valued in the airline industry due to the fact that they play the role of a cornerstone in creating and incorporating information resources into the knowledge building process and decision-making in the organization (Saito, Umemoto and Ikeda 2007). This aids in enhancing the organization’s operational efficiency in offering services to its client. More on this, ICT helps to enhance the airline’s value chains and hence spurring it towards achieving its objectives. The Yielding Management System (YMS) for instance is a key feature in improving Malaysian Airline Systems’ worthless results of the past. It helps airlines utilize revenue to its maximum for every flight they make. For instance, as a result of the YMS, a rise in revenue of around 3-4 percent has been realized by the AirAsia airline without any significant changes in the number of aircrafts (kho et al., 2005).The CRS has also helped the fueling of the airline industry in Asia (from 2.2 million to 7million passengers in 2 years) and has also minimized costs by acting as a direct sales engine by getting rid of the agents thus cutting down on the funds that have to be spent as commission on them. In this case e-ticketing in the Malaysian air travel has saved up to RM 19 per ticket. The electronic computer management is also helping the company to manage the frequent flyer loyalty program and in the effective use of customer database. Other KM technologies for example collaboration, mobile work, content management, business process management (BPM), business intelligence, and knowledge sharing are employed in the industries. The introduction of the new integrated human resource management system has trimmed down the administration costs, improved data management and improved the efficiency of the human resource division. 4.2 Organizational learning The Malaysian airline industry and the Asia Air industry continue to learn to improve the organizational performance. The Malaysian Air industry after successful application of KM and triumph in business is now trying to adopt and internalize the new ways whereas the Asia Air is trying to cope with the expansion of its market and also streamline on cost efficiency. Together they are thus trying to face the harsh operating conditions that are encountered with various global airline industries. In detailed form, the organizational learning context comprises of three elements I.e. people, processes and technology. The working staff is a major component of the knowledge management as knowledge is channeled through the staff that develops and controls it. The Malaysian Air industry have used a concept brought by Ingram and Baum 1997) that and organization can learn from their own and their industry’s experience, where they practiced it with their business team. Both the industries use an integrated performance management system to improve staff competency and to capture future talent (Pemberton & Stonehouse 2000). The e learning portal used by the Malaysian Airline does provide it with personalized, timely, current and user-centric educational activities through the accessibility of various e-learning resources from a variety of sources. Technology also greatly contributes to the success of Knowledge Management. According to Pemberton and Stonehouse (1999), only the businesses that keep abreast with technological advancements can be able to cope with management of knowledge effectively, which will be able to result in greater intelligence and rapid learning which are essential in order to gain competitive advantage. The internal division of the Malaysian Air Services facilitated the replacement of its chronically inadequate legacy accounting system hence resulting in improved quality and timeliness of information for the management decision-making and significant reduction in manpower (Whittle 2007). 4.3 Knowledge sharing Most airlines do share their knowledge with both internal members and other external parties such as financial institutions, suppliers, commercial partners, the government and customers to establish a powerful network which they can leverage for their own advantages (Camison 2009). The Malaysian Air Services with other airlines has established a well-balanced network covering all its major markets and this has been for its greater advantage.MAS and AirAsia are using both the formal and informal communication channels such as the e-mails, memos, and bulletin boards to prevent any barrier from getting on the way of communicating (Jennex 2007). Silo mentality has a counter-productive impact on knowledge sharing as most of the communication is vertical and the focus is inward. Realizing this, MAS has put emphasis on open and honest communication, effective consensus building and teamwork (McDermott and O’Dell 2001). It has thus set a whistle-blowing policy, cross-functional business committee teams, constant communication and the unraveling of the plans of the company to the employees. Informal team culture is said to play a vital role in helping members to bond which according to Nonaka (1994), aids in the facilitation of knowledge sharing. 5.0 Strategies For future use of Knowledge Management In order to remain in the market and stay competitive, there is need to develop new knowledge; otherwise the old will only make the company or industry to be archaic. Thus the future success of airlines will entirely depend on how quick they will be able to adapt to both competitive and market changes. ICT is believed to remain prominent and urgent in the knowledge management implementations in the industry (Malhotra 2000). It will help the airlines to streamline their services and automate their processes in order to reduce complexity and also save on costs. Greater convenience on the side of passenger transportation and freight are also other urgent demands of the future. Integration of the knowledge management system and the customer relation management system will lead ICT to assist in enhancing the transaction-data processing, to make better informed decisions, value added customized products and services among other benefits (Powers 2006). It will also support the renowned codification and personalization knowledge management strategy which will help the employees to be acquainted with a wide variety of better informed people to solve business problems. The continued advancements in pricing and revenue optimization system will help airlines to retain their competitiveness and increase their profit margin (Ricart & Wang 2005). Organizational learning can be so vital more so as the airline industries seek to get the new knowledge and upgrade their core competences to gain competitive advantage over their rivals (McFarlane 2008). This can be fixed by acquiring knowledge workers, training and development, knowledge sharing, e-learning, benchmarking exercises among others. The airline industry will adopt the learning cycle framework where both the passive and active stages of learning are combined. According to Honey and Mumford (1998), this learning process will help the organizations to learn more effectively. Since the knowledge workers are value adders and creators, organizations will are forced to employ more of this like the Chief Knowledge Officers whose strategy is to find the knowledge needs of the organization (knowledge sourcing), find ways to meet the needs (knowledge abstract), identifies and refines various ideas into specific outcomes (knowledge conversion) and redistributes the knowledge i.e. knowledge diffusion. The COK may also monitor regularly and access the need for new knowledge management (Beerli & Falk 2002). The practicing of knowledge sharing is still at its earlier stages and can still be seen advancing to greater heights in the near future (Davenport & Prusak 1998). T he efforts of future management are redirected towards more collaboration to source more information, encouraging corporate-wide campaigns, employee education and appropriate reward systems. Knowledge repositories will continue to be of importance in the future and will include lessons learnt from best and worst practices and other relevant information (Liebowitz 1999). Conclusion The knowledge era business environment has made businesses highly dependent on the knowledge in order to remain competitive in the market (Jones & Poole 2006). The abundant information available has necessitated the use of complex techniques of knowledge management so as to make the information of importance and value (Day & Mclnerney 2007). The report focuses on the basic concepts of knowledge management and key aspects in the airline industry. The summoning of this report concluded that the generic knowledge is particularly of great importance in running the daily complex procedures in the airline industry whereas the specific knowledge can be of great importance in gaining competitive advantage over other competitors in the market (Geisler 2009). The report focused on two Asian airline industries, Malaysian airline industry and the AirAsia industry which operate on an oligopoly market structure where they practice Knowledge Management in order to support their respective competitive business and strategies (Doganis 2006). The oblique approach to KM is because it requires gradual application and implementation by systematically incorporating KM tools and techniques into their existing stage of business (Taylor 2008). ICT has also greatly contributed to the working towards efficiency of the airline industry by knowledge capitalization, development and utilization thus reducing operation costs and produced unique business strategies (SAIC.com 2008). 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