Continental Airlines Business Strategy - Essay Example

?Introduction Businesses have become highly competitive in the current environment of recessive economy and rapid globalization. The external and internal environmental factors hugely impact firms’ performance and require dynamic strategic initiatives to meet new challenges successfully (Spector, 2010). Indeed, in the fast transforming dynamics of the contemporary business, the tangible and intangible factors often lead to deteriorating performance. Failing firms can be turned around successfully by dynamic managerial leadership. Continental Airlines is landmark example of a firm that had audaciously turned $613 million loss into net profit of $224 million within a year in 1994/1995. Continental Airline Continental Airlines is presently America’s fifth largest airline that carries around 50 million passengers a year across the globe to more than 227 destinations. But a couple of decades back in 1993, it was facing its third and final bankruptcy when the new CEO Gordon Bethune and Consultant, Brenneman created history in the turnaround of Continental Airlines. Their leadership initiatives turned the loss of $613 million in 1994 to $224 million profit in 1995 (Brenneman, 1998). The discontented and highly demotivated workforce became the major enabling elements of success that contributed to its renewal. The turnaround strategy was critical factor that was conceptualized around four simple strategic principles that required strong belief, persistence and constant motivation. The creative approach highlighted leaders’ vision which was used to inspire the workforce for higher productive outcome. Turnaround strategy Turnaround strategy of Bethune and Brenneman was mainly focused on how the firm’s falling fortunes can be turned around into success. They did not place undue emphasis on cost cutting but rather made judicious plans for building strong team of high performance members who believed in collective actions and shared goals. The leadership of new management was exemplary in their forward looking outlook and expedited the process of recovery with single focus on defined goals and objectives. The strategies that were implemented are as follows: 1. Strategic action plans for recovery Bateman and Snell (2009:132) assert that strategic plans facilitate organizations to be innovative and develop linkages to meet the needs of the markets. Flexibility of approach and well laid out plans provide firms with clear direction for the future (Montgomery, 2008). In Continental case, action plan was made with feedback from the customers and employees, which was communicated across the workforce. The recovery plan was distinct in its simple targets but strict in its timeframe so that recovery could be fast. The necessity of fast action was communicated to workforce so that they could understand and become proactive in making it a success. It worked in Continental case because the high frustration in the workforce was mainly due to unclear and frequently changing strategies of the past. The lack of concise directions and target had led to disillusionment, adversely impacting their motivation for higher achievement. The new plans were clearly defined by the management and communicated on regular basis to the workforce that helped to strengthen their confidence and motivated them to work towards the goals with renewed enthusiasm. 2. Leadership initiative and team building Drucker (1999) believes that external and internal environment hugely contributes to business performance and managerial leadership innovatively exploits them for the organization’s advantage. The open communication approach used by Bethune and Brenneman helped in adapting to the strategic changes that were introduced to transform business dynamics. Leadership initiative is critical factor to develop an organizational culture of proactive participation, shared learning and strong teamwork (Shapiro, Slywotzky and Tedlow, 2000). The leaders looked for opportunities and exploited them with a sense of high urgency through a team of motivated workforce. Though they fired 50 of 61 top management executives but they did so with dignity that helped to convey the humanitarian approach of the leadership and promoted an environment of honesty, integrity and trust. The new team members were strongly motivated professionals who looked forward to turning obstacles into new opportunities. 3. Focus on customer satisfaction Customer satisfaction and exemplary customer service are two fundamental issues that are intrinsically linked to success (Nargundkar and Srivastava, 2002). Customers are the mainstay of the business and new leadership communicated the same to the workforce. They also empowered them to be innovative in their approach to ensure customer satisfaction. Most importantly, both the leaders personally apologized to the customers and shared their plans for greater services that helped to inculcate trust amongst the disgruntled clients who were impressed by the approach of senior management. Customers’ feedback is vital for improving customer services for increased productivity. Asking right question was key to new strategies as it helped to identify factors that were important for customers (Grant, 2007). Thus, timeliness and efficiency, good ambience, good meals at mealtime, safety, increased reliability in baggage handling and exemplary customer service became the major planks of turnaround strategy. It not only helped only to motivate workers for higher performance but also resulted in improving firm’s market credibility and increased clientele which expedited recovery. 4. Effective communication This was the most important element of the turnaround strategy that facilitated in not only in empowering the workforce but also inculcating a strong sense of trust and achievement that their efforts had produced. The progress of the work was regularly communicated to the workforce through emails and post. Sull (2000) claims that in failing business, people are often caught in active inertia which highlights people’s inability to take appropriate action at the right time who are afraid to disturb established pattern of work. Good leaders evolve dynamic plans that can meet the challenges of time which was done in Continental case. Brenneman and Bethune used effective communication to bring about change and sought employees’ active support in promoting customer service and improving business efficiency. Conclusion The revival of failing business is complex as it requires changing organizational goals and creating new culture that can incorporate dynamics of changing environmental conditions. This is highly important factor that visionary leadership is able to use successfully in turnaround strategies. Constant interaction with the employees helps to disseminate organizational strategies and plans so that workforce understands the need for changes and become actively involved in it. It also motivates workers for higher productive outcome for faster recovery. The leaders at Continental Airlines had used these strategies to turnaround the loss making firm into a profitable enterprise in a short time. (words: 1054) Reference Bateman and Snell. Management: Leading and Collaborating in a Competitive World. 8th ed. NY: McGraw hill, 2009. Drucker,P. Management Challenges for the 21th Century. NY: Harper, 1999. Grant, Robert M. Contemporary Strategic Analysis. 6th ed. London Blackwell, 2007 Montgomery, Cynthia A. Putting Leadership Back into Strategy. Harvard Business Review, 2008. Nargundkar, S. and Srivastava, A. Analytical modeling for effective implementation of CRM Strategies in the credit business, Decision Sciences Institute 2002 Annual Meeting Proceedings (DSI2002), St. Louis, USA, 5-9th March, pp. 694-699. (2002). Shapiro, Bensen P.; Slywotzky, Adrian J.; and Tedlow, Richard S. Why Bad Things Happen To Good Companies. Strategy and Business, 2nd quarter, 2000. Spector, B. Implementing organizational change: Theory into practice 2nd ed. Upper Saddle River, NJ: Pearson Prentice Hall, 2010. Sull, Donald N. Why Good Companies Go Bad. Harvard Business Review, 2000. Read More