Strategic management in Delta Airlines - Case Study Example

? Aviation industry is regarded highly competitive, requiring technical expertise and safety measures to be adopted at their level best. But the corecompetency that make two similar airlines differentiate are dependent on the role played by customers, people and employees irrespective of machinery and tangible assets. The implications generated through a slight deviation in not meeting the potential needs of general stakeholders could be pervasive, influencing the culture of an organization, its structure and strategies encompassing operational procedures (Appelbaum, & Fewster, 2004). At present Delta Airlines is adept at serving one sixty million clients per annum, offering travel to near three fifty destinations across seventy countries (Delta, 2011). Strategy is being driven in the US aviation sector by two factors that emerged right after the deregulation took place in 1978. One is the worldwide safety concern and the other being the increased perceptions of clients in relation to the services offered by the company. Studies carried out by researchers have revealed that poor service acquisition and accidents in aviation are not always linked to the technical faults yet sometimes there are human factors involved. “Sub-optimization” or lack of proper management practices with regard to decision making, communication, employee motivation could bring in a rapid turnover in client share, market position, loss of tangible assets possessed by the firm, and in more severe circumstances this could lead to “loss of life”. Delta Airlines realized the vital role that strategic managers could play in terms of improving productivity and minimizing costs therefore personnel managers are given due participation while formulating company’s major goals. For such a safety prone, client centric context, traditional corporate models are not feasible therefore HRM expertise is needed to organize internal marketing policies for gaining customer approval. In Delta Airlines, a strong emphasis is now being placed on strategic managers regarding recruitment; issues concerned with employ empowerment and firm’s strategic orientation (Appelbaum, & Fewster, 2004). Prior organizational experiences dictates that strategic managers have failed to prove their mettle in terms of devising the most appropriate strategy for their respective firm that could offer competitive advantage, developing a core competency for the organization. Also the significance of formulating well structured corporate strategies has often been neglected. The conventional nature of strategic management has been perceived as handling employee disputes within the firm and to supervise some of the administrative tasks but with the passage of time HRM has gained the reputation as a phenomenon that affects the overall strategic framework of a company, simultaneously strategic managers also tried to adapt to the changing work environment with the primary thrust being properly implementing well planned initiatives (Swiercz, & Spencer, 1992). In April 1994, Delta Airlines tried to amend its current strategic demeanor by launching “Leadership 7.5” a programme that benefited the company in terms of gaining excessive profits by curtailing company’s expenditure in comparison to the competition prevalent in the industry. It so happened that emerging company by the name of “Southwestern Airlines” managed to maintain a firm market share by initiating low cost strategies, that were favored by target customers as they were being offered cheap fare rates by the company. That resulted in a rapid turnover since 1990 in prior established firms including Delta Airlines. For organizations to survive in a globally competitive environment, all key players have to redefine their market strategies with the alternating market situation. The aim is to get the maximum benefit with limited monetary spending Although Delta Airlines excelled in offering full service package to the travelers yet half-filled flights forged it to develop a corporate strategy with the main aim of lessening annual expenditure to almost 2.1 billion dollars till the year 1997. The company analyzed its weaknesses being high salary packages to the employees, luxurious in flight provisions etc. “Leadership 7.5” programme focused on mitigating extra service costs on every seat of the airplane per mile of flight ranging from 9.6 cents to almost 7.5 cents in the year 1997. Marketing expenses were saved to almost four hundred million dollars by instituting a reduction in commissions sanctioned for travel agents particularly focusing to maximize sales. From on board offerings like, food services and purchase, three hundred and ten million dollars were gained while similar amounts were generated from layoffs. Downsizing of employees was practiced by designing “cross-functional” workforce with the aid of technical specialists in the field of avionics, hydraulics and related trades (Srinivasan, 2005, p.7). Delta Airlines has maintained a famous brand name due to higher number of committed employees who were apt at delivering the best customer support provisions but in 1994 the top management had to take a critical strategic decisive step due to two year continued loss of more than ten dollar per share. Major financial losses were also figured in 1991 due to the Pan Am market share acquisition of almost 491 million dollars and economic recession as a result of Gulf war that raised global fuel prices affecting the purchasing power of people leading to lower air travel. Ron Allen the “Chief executive officer” and chairperson of the company made it possible to implement significant downsizing within the time period of three years. Total number of workers were cut short to 11, 458 employees from the previous sum of 69,555 yielding almost eight percent reduction from past two years. The company had to get rid of many experienced personnel handling customer care department to be replaced with amateur workers who demanded less salary (Srinivasan, 2005, p.7). Delta Airlines was facing financial deficit in the year 2001 and had to curtail further expenses as entire airline industry was bearing the after effects of economic downturn after the tragedy of September, 11. This has led the company to adopt strategies mitigating some of its major customer support provisions including loyalty programs and reservations etc. In the year 2002, the firm had almost twenty contact centers for reservations throughout the world having six thousand employees who had to tackle and retain loyal clientele of one twenty million customers. The company made this possible by off shoring i.e. extending and transferring some of its services to India. This policy enabled Delta Airlines to decrease labour costs. In US, an employee salary accounted for forty six thousand dollars whereas in India the company had to pay only six thousand dollar to the local employees. Further training costs were also minimal (Patel, 2005, p.30-31). Delta Airlines has managed to remain aligned in a narrow organization matrix. In spite of investing in new arenas, the firm largely depended on the profit acquisitions for improving the route coverage activities. Due to excessive reliance on one aspect of business, organizations have no alternative to implement for sustainability in economically deprived situation. This is quite prevalent after the recent recession as Delta Airlines had to bear bankruptcy and then decided to emerge with a different expansion policy (Enz, 2009, p.85). Micheal H. Campbell is currently working as an HRM expert in Delta Airlines. The strategic milestones achieved by Delta under his supervision included the launch of programs in which company’s stock awards, global success and profits are shared with workforce at all hierarchy levels. His guidance also led the company to devise “non- profit funds” for workers to provide them with financial assistance in unforeseen crisis. Such strategic demeanor has helped Delta Airlines to progress with a motivated team of people who value their company for the incentives being offered to them in return (Delta, 2011). Unless strategic managers in the airline business adopt valid strategic incentives, the organization is likely to indulge in ever impeding pressures immersed by “cost cutting binges” and price conflicts. Managers must sought audits pertaining gaps in the air line’s current performance when compared with already perceived goals. Finally mergers in the aviation industry are seldom successful due to the lack of attention being paid on the human factor prevalent in both organizations’ culture (Appelbaum, & Fewster, 2004). References: Appelbaum, S.H. & Fewster, B.M. (2004). Human Resource Management Strategy in the Global Airline Industry- A focus on Organizational Development. Business Briefing: Aviation strategies: Challenges and opportunities for liberalization. Airline Issues, pp. 70-75. Retrieved at: http://www.touchbriefings.com/pdf/12/avia031_p_apple.pdf (Accessed: 2 February 2011). Enz., C.A. (2009). Hospitality Strategic Management: Concepts and Cases. John Wiley and Sons. Delta (2011). About Delta. Retrieved at: http://www.delta.com/about_delta/index.jsp (Accessed: 2 February 2011). Patel, A. (2005). Outsourcing success. Tata McGraw-Hill Srinivisan, R. (2005). Strategic Management. The Indian Context. 2nd Edition. New Delhi. Prentice Hall. Swiercz, P.M. & Spencer, B.A. (1992). “HRM and Sustainable Competitive Advantage: Lessons from Delta Air Lines”. Human Resource Planning, 15(2), pp. 35-46. Read More