Customers in the Airline Industry - Term Paper Example

Knowledge sharing in Airline industry Insert Insert Insert supervisor Insert Knowledge sharing is one of the most effective communication methods that any organization should have. The success of the channels used affects customer relationship management in any business. The common forms of knowledge shared are on regulatory environment of information systems, methods and processes, products and services, markets, customer needs, employee skills, and competitors in the market. Through scholarly papers on knowledge sharing in airline industry, this research finds out that knowledge sharing is highly aided by accessing reliable communication networks that facilitate smooth flow of information in and outside the industry. The information shared can be on airline products competitive domain, revenue allocation or how other firms in the industry are doing as a way of advising the industry on the potential ventures to take in the future. Introduction With improved communication technology, customer relations in service industry have been improving. The need for high collaboration, as a means to reduce costs and enhance customer focused services, has been in the rise in the airline industry. The collaboration is majorly due to the fact that customers in need of the services are more sensitive to any hiccup on information than in an industry trading with tangible goods. The travel industry has therefore adopted a strategic perspective to enhancing customer relationship by creating information database from which service quality is evaluated (Njenga, 2010, p.87). These improvements have given a direction customer satisfaction as the exact place where airline profitability come from. Customer focus processes that work beyond environmental and organization factors are attracting more interest than they have done in the past. These processes involve identifying and satisfying the customer needs on expected quality and delivery times as well as meeting those demands either through a new product or improving on the old product (Mohammed & Rashid, 2012, p. 221). The customer is the center of the operation and the best interest of each stakeholder is measured by how much they contribute in meeting the customer needs and wants. Knowledge management and sharing is thus a prerequisite to achieving such high levels of proficiency. Research has shown that airline customers are looking for good travel packages at lower tickets prices over the internet. Many tend to compare prices offered by different airlines despite the fact that they will still book tickets through travel agents. The customers’ needs and satisfaction are thus depended on relationship between the agents and the airlines. Therefore, to arrive at customer satisfaction, customer knowledge and the use of it stands paramount in the whole process. The knowledge gathered and shared directs the airline into developing successful products, services and systems that makes the customer desire to come back for more (Fan & Ku, 2010, p.203). Through sharing important customer-related knowledge and working to even improve quality as directed by the information gathered, the airline gains competitive advantage over its competitors. Customer value creation in airline industry is known to be the product of effective customer knowledge sharing. The collaborative relationships established between the customers and the service provider affirms on the effectiveness of the established knowledge sharing channels in an airline. There is also an established collaboration between partner firms with same strategic objectives. This new collaboration aspect is an aspect of price competition that has hit the industry. The increased competition in the airline market has led to companies adopting strategic collaborations as a way of increasing group competitiveness, innovation, and cost (Fan & Ku, 2010, p.204). Business travel costs of one airline are therefore reduced since the cost is shared among the collaborators. The strategic alliances are established through knowledge sharing and keen attention paid to operational implementation by the partnering firms. Innovation patterns have been the key ingredient for competition in the airline industry. Any innovative aspect added into the airline improved the travel package either at a lower cost or at a higher cost. Either way the cost takes, the travel agents provide the knowledge to the customers about the new airline products and services being offered. The travel agents share this knowledge in a collaborative perspective since the whole package is the effort of all partners involved in establishing customer satisfaction. The value expressed by the travel agents to both internal and external customers is thus a reflection of the combined efforts of all the stakeholders. Strategic alliances in airline companies have come to “increase competitiveness in service quality, innovation and cost due to changed business environment resulting from increased competition in the airline market” (Ku & Fan, 2009, p. 1407). While playing different roles in enhancing customer satisfaction, revenue sharing becomes the main reason why these strategic alliances are formed (Hu, Caldentey, & Vulcano, 2014, p. 1177). The airlines negotiate fixed proportion rates for revenue allocation at the beginning of the collaboration as shown in figure 1 below. The expected revenue thus becomes the managing principle behind forming the alliance between marketing carrier and operating carrier. Each carrier capitalizes in maximizing ones revenue through creating traffic flow in the global airline network (Kimms & Cetiner, 2012, p.512). The alliance members thus share knowledge that is relevant to maximizing alliance revenues. Figure 1: Operational and Tactical levels of the Airline Alliance game Source: (Hu, Caldentey, and Vulcano, 2013, p.1178) Technical part According to Broekel and Boschma (2011, p.409), knowledge sharing and innovation in aviation industry is more effective when channeled through established networks. However, the effectiveness of these networks is affected by four dimensions of proximity from one travel agent to the other. These are cognitive proximity, organizational proximity, social proximity, and geographical proximity. Cognitive proximity measures the degree of knowledge base similarities among two players. The players are expected to have adequate ability to understand, exploit, and categorize knowledge (Broekel & Boschma, 2011, p.411). The more similar the knowledge base, the less innovative the collaboration between two players will be. Cognitive proximity is thus effective when there is considerable distance since only then do they have different competencies that will be helpful when knowledge sharing is concerned. Less cognitive proximity strengthens competitive advantages of the firms in respect to their network partners. Organizational proximity refers to how much relations are shared in a hierarchical manner. This dimension is less for independent actors and high for an organization with hierarchical management systems. Organizational proximity thus manages knowledge sharing channels as well as costs involved. The lower the proximity, the more flexible the players are to collaborate and share knowledge important to airline industry growth (Broekel & Boschma, 2011, p. 1205). This is different from social proximity that is based on relationships in micro-levels. This dimension is based on trust that has been identified as main feature in fostering knowledge sharing. Geographical proximity influence individual motivations and accessibility to knowledge (Javernick, 2011, p. 240). For example, individuals from highly accessible knowledge zones have advantage over the less knowledge accessible zones. The disadvantage one might reach out to the advantaged player and the knowledge shared will have more impact than when shared with same zone players. The innovative performance of the firm is thus depended on the low geographical proximity in the airline industry. The key stakeholders in the airline industry are the airline firms, the travel agents and the airline customers. The three work together in establishing a knowledge base that informs each of the demands of the markets to the travel agents and the airlines as well as the best packages to the customers. The first contact point of the customer is the travel agents. The travel agents are thus mandated to come up with suitable customer packages that need to be communicated to their customers through well informed employees and airline alliances. The second point of contact is the airline. There is therefore a need for knowledge sharing between the airlines and the travel agents for the existence of the collaboration as well as maintaining customer centered focus in the industry. Through the sharing, market knowledge, effective product and services creation, customer needs, effective service delivery processes, effect of competitors, required employee skills, and the market regulations are communicate (Fan & Ku, 2010, p.204). The collaborators thus are able to achieve competitive advantage over their competitors in the market (Pfeffer, 2005, p. 105). Knowledge sharing in the airline industry aims at achieving customer lifetime value perspective (Verhoef & Lemon, 2013, p. 3). Many airline businesses work at establishing long-term customer relationships. Through long-term relationships, customer lifetime value is measured by calculating the total revenue from a customer minus total costs over time. To be able to arrive at such crucial information, customer databases with information on customer transactions becomes important. Customer-base analysis as well as predictions on lifetime and future customer transactions from the data gathered can advise on customer retention and new customer acquisition strategies. The increased competition on market dominance is the key driver to automated customer service in the airline industry (Verhoef & Lemon, 2013, p. 3, p. 11). Business intelligence knowledge, decision making, customer value and relations and quality of service required in the market are all shared across to ensure uniform services and products delivered to the customers. The demand for growth has led firms to practice customer oriented management that is shared across all levels of service and goods delivery. Customer oriented management skills shared thus creates opportunities for nurturing and sustaining long-term relationships since it aligns the firms with the changing needs of the customer shared through an integrated customer knowledge system. According to Tsai, Su, & Chen (2011, p.761), defining and identifying competitors is a complicated task requiring evaluation of firm’s strengths against its competitors. The evaluation assist in gauging the exact threat the competitor poses on the company without underestimating anything. The evaluating firm seeks to understand the competitors concerns and priorities as a way of looking for open avenues through which the firm can out-compete the competitor. Such knowledge is gathered when engaging in competitive interaction in the market. The firm also evaluates the competitors view of the potential threat presented to them by the evaluating company as well as gather knowledge on the possible action plans the competitors is planning on. However, getting such deep secret information is not easy. The valuating firm thus places itself in the position of the competitors to be able to conceptualize competition in the eye of the competitor. The knowledge gathered is again shared in secret to the management where implementation of relevant strategies becomes the only visible aspect of the whole evaluation process. To achieve such high levels of secrecy, the evaluating firm shares the knowledge to the key stakeholders only. The knowledge shared on the findings attracts contributions of each stakeholder on the necessary actions that can be taken to enhance brand image and gather competitive advantage of the competitors. Future prospects According to Hu, Caldentey, and Vulcano (2013, p.1178), despite many collaboration done in the airline industry, reservation systems of the alliance members still retain autonomy because of the autonomous nature of the organizations. Some alliance members have opted out of alliances to independent operations as well as others have developed lack of trust in their partners hence opting for independent operations. The independence option could be caused by lack of incentive and coordination mechanisms that safeguard one from exiting at will. In most alliances, share per ticket and interline traffic have not been well defined instead, static proportional rates, use of aggregated available seat miles, bid price values, and relative mileage with rectifications for short distance have been used. The revenue allocations have thus been built on trust rather than on set rules protected by law. The future for the alliances is thus based on assurance that the set rules will be adhered to and any changes should be effected after a documented agreement is made as rule. This paves way for further research on the knowledge sharing in effect to revenue sharing in airline industry. Exploring this topic will demystify knowledge sharing position in the disintegration process as well as advice on the best approach to enhancing airline alliances. The research plan will be achievable through carrying out a case study on a number of airlines that have disintegrated. The investigation will explore the reasons for disintegrations as well as link them to knowledge sharing concept. Discussion and conclusion Brand image, marketing strategies and ability, and innovative levels in the airline industry are key selling features. The customer perspective on the three aspects determines customer retention as well as attracts new customers. With such knowledge managers have invested more energy in emphasizing long term client relationships since the longer the customer utilize the airline services and products the more revenue the customer give the airline and the higher the profit to the airline. This concept encourages knowledge sharing to all involved partners as a way of ensuring that the customer gets wholesome quality that will enhance loyalty to the company. Collaborators in the airline industry look forward to achieve competitive advantage in the market. To achieve this, many companies are now moving to offering customized products to their customers. Cross-selling and up-selling have also been the new development strategies that the airline industry is taking up. This will be achievable through automated, customer support, sales and marketing communication channels. Knowledge sharing in the airline industry is made through established networks. These networks are a product of four proximity dimensions. These are cognitive proximity, organizational proximity, social proximity, and geographical proximity. While cognitive proximity measures the degree of knowledge base similarities among two players, organizational proximity refers to how much relations are shared in a hierarchical. The hierarchy defines the established knowledge flow channels in an organization. Social proximity and geographical proximity are both relational dimensions. Social proximity is based on trust while geographical proximity works through evaluating accessibility to relevant information in the market. The level of knowledge shared in the airline industry is depended on where one is placed in the proximity game. For cognitive and organizational proximity, the far the partners are in knowledge and position, the more innovation the collaboration will achieve. This is unlike in the social and geographical proximity where the more acquainted the player is to each other, the more likely they will co-work. However, the players are expected to have adequate ability to understand, exploit, and categorize knowledge based on their level of interaction. Bibliography and citations Broekel T., & Boschma R. (2011). Aviation, space or aerospace? Exploring the knowledge networks of two industries in the Netherlands. European planning studies, 19(7), 1205-1227. Broekel T., & Boschma R. (2011). Knowledge networks in Dutch aviation industry: the proximity paradox. Journal of Economic Geography, 12(2012), 409-433. Fan Y., & Ku E. (2010). Customer focus, service process fit and customer relationship management profitability: the effect of knowledge sharing. The service industries journal, 30(2), 203-223. Pfeffer, J. (2005). Producing sustainable competitive advantage through the effective management of people. Academy of Management Executive, 19(4), 95-105. Hu X., Caldentey R., & Vulcano G. (2013). Revenue sharing in airline alliances. Management science, 59(5), 1177-1195. IATA. (2011). Vision 2050 report, Singapore, 12 February 2011. http://www.iata.org/pressroom/facts_figures/documents/vision-2050.pdf. Accessed 11 November 2014. Javernick, A. W. (2011). Knowledge-sharing connections across geographical boundaries in global intra-firm networks. Engineering project Organization Journal, 1 (4), 239-253. Kimms A., & Cetiner D. (2012). Approximate nucleolus-based revenue sharing in airline alliances. European Journal of Operational Research, 220(2012), 510-521. Ku E. S. S., Fan Y. W. (2009). Knowledge sharing and customer relationship management in the travel service alliances. Total Quality Management, 20(12), 1407-1421. Njenga K. (2010). The increasing focus on managing relationships and customer retention. The journal of language, technology and entrepreneurship in Africa, 2(1), 85-92. Tsai W., Su K., Chen M. (2011). Seeing through the eyes of a rival: Competitor acumen based on rival–centric perceptions. Academy of management journal, 54(4), 761-778. Verhoef P. C., & Lemon K. N. (2013). Successful customer value management: Key lessons and emerging trends. European Management Journal, 31(2013), 1-15. Read More