Tiger Airway - Essay Example

?Tiger Airway case study Case study question Tiger’s low fares are their key competitive strategy. Discuss how this affects its overall competitivestrategy; pricing and profitability; service delivery; ‘physical evidence’ and customer satisfaction. The continuous increase of competition is a problem related to all industrial sectors. The identification of strategies that will help firms to keep their competitiveness towards their rivals is a challenging task taking into consideration the turbulences in the global market and the continuous change in the customer preferences. Managers in Tiger use the low fares as a tool for attracting customers – also for keeping their existing customers. However, this practice has affected the firm’s overall competitive strategy. Also, other parts of the organizational activity, for instance the level of the firm’s profits but also the quality of the service delivery has been influenced by the decision of the firm’s manager to adopt a ‘low-fares’ strategy. The above problem would be made clear by referring primarily to the relevant literature. Then, reference should be made in the relationship between the firm’s low-fare strategy and the other elements of the organization, as described above. In accordance with Daly (2002) pricing is a valuable competitive strategy; it is noted that even a minor decrease in the price of a product/ service can help a firm ‘to get a contract’ (Daly 2002, 14). On the other hand, Smith (2011) states that pricing is not always a competitive advantage; reference is made specifically to the case that a firm decreases its prices lower than its competitors. It is explained that in the above case pricing cannot be characterized as a competitive advantage since the firm has no profits, and in this way, no advantage exists for the firm by adopting the particular strategy (Smith 2011, 272). From another point of view, Porter (1998, 528) notes that through pricing, a firm can support its brand name. This view is particular important in the case of low fare airlines, like the firm in the case under discussion. Moreover, Marn, Baker and Zawada (2010, 81) state that pricing can be accepted as an effective competitive strategy but only under the terms that the laws on fair competition are not violated. Towards the same direction, Spulber (2007) supports that pricing can be a highly effective competitive strategy but only if it is combined with another strategy of similar scope; reference is made, for example to the combination by firms of pricing and distribution strategies for achieving a competitive advantage (Spulber 2007, 176). In the case under examination the effects of the firm’s low-fares strategy on its other strategies, would be described as follows: a) the firm’s competitive strategy have been affected by the low-fare practice at the following points: a1) it is difficult for the firm to develop other competitive strategies due to the reduction of its profits, a2) the firm’s brand name is enhanced – as a low – fare airline services provider, a3) because the quality of the firm’s services has been decreased, the actual benefits of the firm in regard to its competitiveness towards its rivals are minimized; b) because of the decrease of fares, the profits of the firm are decreased; this fact, inevitably affects the firm’s performance, since it is not possible for the firm to introduce plans for securing its position in the market; c) at the next level, the limitation of the firm’s profits has led to the decrease of the quality of its services – a fact highlighted in the case study (where reference is made to the lack of cleanliness of the cabin, the inappropriateness of the seats in terms of space left for passengers, the lack of facilities and stores in the waiting area of the airport – referring to the part of the airport where the passengers of the particular firm have to wait – and so on); from this point of view, the decrease of the firm’s fares has not led to the acquisition by the firm of a competitive advantage – the low fare practice cannot, itself, support the increase of the firm’s competitiveness. In the case under examination, the lack of effective complaint management, combined with the low quality of customer service, destroy the firm’s brand name; even if its fare is low, its failures in regard to its operations – as described in the case study – eliminate the potential benefits from the low – fare practice. At this point, reference should be also made to the ‘physical evidence’, i.e. to the ability of the customers to have a personal view on the benefits and drawbacks of the firm’s strategies. The low – fares practice of the firm is primarily welcomed by its customers; however, at the end, customers are disappointed with the firm’s practices - especially regarding the terms under which the rights of the customers related to the firm’s services are protected. In this context, the increase of customer satisfaction, as one of the key strategies of the firm’s managers, has not been achieved; on the contrary, the low – fare practice has negatively affected the relationship between the firm and its customers, as indicated in the events described in the case study. Case study question 2 Use the seven Ps framework to suggest ways that Tiger can improve its service but remain profitable. Despite the drawbacks of the firm’s current strategies, it could be noted that the firm would be able to improve its service without decreasing its profits. The specific target could be achieving by using the strategies indicating in the Seven P’s of marketing. At the first point, reference should be made to the elements of the particular framework. The 7 P’s model has been derived from the 4 P’s model of marketing, which has been mostly related to tangible products (Buhler, Chadwick and Nufer 2009). The 7 P’s model is consisted from the following elements: the well –‘ known 4 P’s of marketing, i.e. the product, price, promotion, place strategies/ elements’ (Buhler, Chadwick and Nufer 2009, 138), plus the following elements: ‘people, processes and physical evidence’ (Buhler, Chadwick and Nufer 2009, 138). The 7 P’s marketing mix is used for analyzing the marketing practices of services firms, as being most appropriate for the firms of this type (Gupta 2006, 22). The above framework would help the firm to improve its service, without losing its profits, in the following ways (reference is made to each one of the elements of the 7 P’s marketing mix): a) the price of the firm’s services should be decided not just in accordance with the price of other competitors but also in accordance with the cost of the firm’s services so that these services are kept at a high level (Ellwood 2002, 23); in other words, the firm’s fares should not be reduced at such level that the services of the firm are of extremely low quality; in this context, the firm’s current fares should be slightly increased, so that the quality of the services provided to the firm’s customers to be increased, b) the firm’s existing strategies should be updated, focusing on people, as a key factor for the success of the firm’s performance; the above initiatives should be characterized by the introduction of strategies that support employees across the organization, meaning that employees are given the support required for delivering services of high quality to the customers of the organization (Lancaster and Reynolds 2005, 41); in the case under examination, Annika failed to inform customers on their rights; however, her failure is related not to her skills but rather to the firm’s strategy, a fact identified by the customer, even with delay. Therefore, by avoiding providing to its employees the necessary support, a firm can suffer a severe damage – referring especially to its relationship with its customers; such perception has been made clear in the case under examination, c) the product, the service in this case, should be improved; indeed, the low quality of its services has been identified as the main weakness of the particular organization; the improvement of the firm’s services would be related to the increase of its fares, the increase of the support provided to its employees but also to the improvement of its processes, as part (d) of the 7 P’s marketing mix (Nargundkar 2006); e) in the case study no reference is made to the firm’s promotion strategies – apart to its well known brand name, as low – fare airline services provider; it is clear that the firm should improve its existing promotion strategies emphasizing not just on the low pricing but also on the quality of its services – at the level possible based on the profits achieved through the increased fares; f) the firm should emphasize on the equal promotion of its brand in all places where it operates – i.e. in all its destinations; the potential increase of destinations would be a critical strategy for increasing the firm’s customer base; however, again, the quality of services provided to the customers and the level of the support provided to employees would be a priority; g) the firm’s customers can acquire physical evidence in regard to the firm’s services – meaning that they can develop their own view regarding the balance between pricing/ quality of services in the particular organization; for this reason, the firm should emphasize on problems which are likely to be noted by customers when accessing the firm’s facilities – referring for example to the cleanliness of the waiting area and the cabin, the protection provided to the customers’ property, the limitation of delays in flights and so on. Case study question 3 How should Tiger have managed the service failure and subsequent recovery with the loss of the passengers’ pram? In order to identify the most appropriate strategy regarding the management of the service failure and discovery in the case under examination, reference should be made primarily to the practices available to firms, which are found at similar position – as these practices have been published in the literature. At the same time, the context of service failure and recovery should be described – aiming to show the level at which the firm’s managers should be held responsible for the particular service failure – but also for the lack of effective plan for service recovery. In accordance with Hutt and Speh (2009) the elimination of service failures is not feasible in firms of all sectors; moreover, the prevention of failures through appropriate measures is quite difficult; it is always possible that factors which have not been identified in advance appear and change the expected outcome of a particular organizational plan. From this point of view, it is noted that it is not the service failure that defines the perceptions of customers on service quality but rather the service recovery. More specifically, it is noted that in the case of an effective service recovery, the customers’ perceptions on service quality are quite good – even if a service failure has taken place (Hutt and Speh 2009, 270). Case (2007) uses a similar approach in order to explain the increased value of service recovery – towards the service failure. The above researcher also emphasizes on the importance of service recovery for the limitation of the negative effects of a service failure; moreover, he suggests the use of standardized methods of service recovery, like the Services Failure Analysis, for limiting the effects of a service failure (Case 2007, 114). On the other hand, Newlands and Hooper (2009) note that ‘the value of service recovery for limiting the effects of a service failure has been overlooked’ (Newlands and Hooper 2009, 310). It is further explained that the success of a service provider to keep a customer after a service failure is fully depended on the ability of the service provider to develop an effective service recovery scheme with no delay (Newlands and Hooper 2009, 310). On the other hand, in a study developed by the Stationery Office (2007) it is noted that the effective handling of services failures is not depended on the effective service recovery but on the effective prevention of the failure. More specifically, it is explained that the negative effects of services failures could be effectively controlled only through the introduction of schemes that can decrease the chances for the appearance of failures – reference is made for example to the Business Impact Analysis (BIA), ‘a method used for assessing the impact on different areas of business’ (Stationery Office 2007, 158). In this context, the firm should have managed the service failure and the service recovery regarding the loss of the customers’ pram as follows: a) since the firm does not use a specific plan for the prevention of the service failure (as suggested above), then it would emphasize on the effective service recovery, in other words, to the full recovery of the loss caused to its customers, b) an investigation should be developed in order to examine whether the customers were appropriately informed from the first moment regarding their rights; c) the employees of the firm should be monitored regarding their responses to the customers’ requests; in case of failure to respond to their obligations regarding the provision to the customers of necessary information to protect their rights, employees should be removed from a particular department – even fired, in case of severe loss to the customer because of employees’ failure to respond to the obligations of his position; in the case under examination, the response of the employee to the customer in regard to his rights should have been checked; the customers should be fully compensated for their pram since they have acted in accordance with the firm’s ‘perceived’ rules (Blythe and Zimmerman 2005). Additionally, two major changes should be introduced regarding the management of customers’ complaints: a) the time provided to customers for submitting a complaint form should be increased – up to at least 1 month and b) a specific department for handling customers’ complaints should be established. References Blythe, Jim, Zimmerman, Alan. 2005. Business-to-business marketing management: a global perspective. Belmont: Cengage Learning Buhler, Andre, Chadwick, Simon, Nufer, Gerd. 2009. Relationship Marketing in Sports. Oxford: Butterworth-Heinemann Case, Gary. 2007. Continual service improvement. London: The Stationery Office Daly, John. 2002. Pricing for profitability: activity-based pricing for competitive advantage. Hoboken: John Wiley and Sons Ellwood, Iain. 2002. The essential brand book: over 100 techniques to increase brand value. London: Kogan Page Publishers Gupta, Dinesh. 2006. Marketing library and information services: international perspectives. Munchen: Walter de Gruyter Hutt, Michael, Speh, Thomas. 2009. Business marketing management: B2B. Belmont: Cengage Learning Lancaster, Geoffrey, Reynolds, Paul. 2005. Management of marketing. Oxford: Butterworth-Heinemann Marn, Michael, Baker, Walter, Zawada, Craig. 2010. The Price Advantage. Hoboken: John Wiley and Sons Nargundkar, Rajendra. 2006. Services Marketing 2E. New Delhi: Tata McGraw-Hill Education Newlands, David, Hooper, Mark. 2009. The global business handbook: the eight dimensions of international management. Surrey: Gower Publishing Porter, Michael. 1998. Competitive advantage: creating and sustaining superior performance: with a new introduction. New York: Simon and Schuster Smith, Tim. 2011. Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures. Belmont: Cengage Learning Spulber, Daniel. 2007. Global competitive strategy. Cambridge: Cambridge University Press The Stationery Office. 2007. Service design. 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