Classic Airlines Marketing Solution - Essay Example

?Executive Summary The ic Airline carrier is currently facing a very tough operating environment. It is currently working in a mature industry, having large number of competitors. This creates a hostile competitive environment for the company. This competitive environment of the company has been augmented by a shift in the operating paradigm of the industry. This shift in paradigm has been the result of an increase in the level of inflation and a rise in the cost of fuel. These two variables have made it imperative for airline carriers to achieve operational excellence and enhance customer loyalty. Unfortunately for the company, it has encountered some internal problems which are preventing it from addressing these challenges effectively. The airline’s CEO is under immense pressure to turn around the fate of the company. The most problematic situation for the company is that it is currently incurring a large cost per customer per mile, and, to add to this problem, the company has just made a mistake in its marketing program. Thus, in this scenario, a new and a fresh marketing approach is required, implications of which should trickle down to the entire organization. This marketing strategy should keep customers as its focal point, because current customer satisfaction level is very low for the organization. Another important crisis which this marketing strategy should resolve is that of positioning. The current positioning statement of the company is taking it nowhere in terms of differentiating its services. Another implication of this is that the employees of the company are feeling an identity crisis. This situation is further made complex by the inability of the airline’s CEO act effectively regarding the utility of the functional areas of the airline. Her focus on numbers is creating a friction between her and the various departments of the organization, especially the marketing department. This friction is being felt at various levels of the organization and thus is a reason of worry because of its potential negative impact on the airline’s organizational culture. This report recommends a market driven strategy to be adopted by the airline. The major aspects of this strategy are the customers and the market; the company is required to tailor its business processes keeping customers as its focal point. In order to effectively implement this strategy, the airline needs to identify its distinctive capabilities and match them with the needs and aspirations of the customers. The company needs to identify all of its distinctive capabilities so that it can come up with a sustainable value proposition. The airline needs to make considerable efforts to align its various business processes. It needs to build systems which help in the coordination of different organizational activities and facilitate the flow of information. Last but not the least, an articulated vision from the CEO of the airline can do wonders for it. 9-Step Problem Solving Model and its application on Classic Airline Problem Definition Today’s airline industry is undergoing or has undergone a paradigm shift. This paradigm requires from airliners to seek operational excellence and nurture customer loyalty. The fundamental variables defining this new face of the industry are increased fuel cost and rising level of inflation. These two variables have severely hurt the profit margins of airline companies. By increasing the cost per mile per customer for these airliners, these variables have dried the operating profits of these airliners. As a result of this, many airlines have declared bankruptcy. These dynamics show that those airlines which are not operationally efficient and lack customer loyalty are bound to be eradicated from the industry. Framework of the Problem As mentioned above, the two variables which have changed the face of airline industry are fuel cost and inflation level. Due to these variables, airlines have to come up with strategies which allow them to absorb these costs. Airlines also need to come up with some value proposition that is sellable to its air travelers. This value proposition should be tailored according to the needs and aspirations of its target market. In this regard, the marketing department needs a clear vision as to who they are serving (target market), what the needs and aspirations of this targeted group are (customer expectations), and how they are going to fulfill the expectations of this targeted group. The marketing department also needs to gain approval for their proposed method from the board members and from the Chief Executive of the airline. It is of utmost importance that the Chief Executive is a person who looks at the broader picture and understands the utility of every function in his organization. Because in cases where the Chief Executive has been found to be confused about the utility of a function, functional disharmony and identity conflict has germinated in organizations. These problems are a serious threat to the organizational culture which spreads across the organization. Identifying the Real Problem Classic Airline is engulfed in a situation which has been described above. The CEO is totally engrossed with the cost issue. She is not looking at the broader picture; she does not understand the importance of the marketing function which shows the true value proposition of the airline. This function seems to be totally confused about the true needs and aspirations of its air travelers, so it is unable to articulate a positioning statement for its two customer segments. Another implication of this shortcoming is that the function is unable to attract the attention of the CEO toward its utility. This lack of communication and disengagement between two key internal stakeholders of the airline is aggravating the problem of a sound positioning statement. The friction that exists between the CEO and the marketing department personals is trickling down the organizational hierarchy. This, in turn, is harming the organizational culture. Augmented by external uncontrollable factors, internal issues prevailing within the organization are starting to harm the services of the airline. Travelers flying with the help of the airline are finding the airlines services as not compatible with their aspirations. Thus, the airline is experiencing a period that can be characterized as one having multiple operational issues and dissatisfied travelers likely to spread negative word of mouth. Possible Solutions Following are the alternative solutions that the airline can turn to: The board should hire a new CEO for the airline. The airline should bring in an external consultant to help them to frame a positioning statement and create a compatible value proposition. The marketing department can recommend a market driven strategy for the company. The company can undergo a merger with another airline. The company can initiate a restructuring effort. Last but not the least, the company can declare bankruptcy. This is the extreme end of the spectrum. Evaluation of Alternatives Alternative Evaluation New CEO The airline can dismiss this CEO on the grounds that she is not farsighted and is the reason behind organizational disharmony. Also the company can sight her inability to cope with competitive pressure. However, the likelihood of this happening is extremely low, because sending a CEO home in such times can send extremely negative signals to the market, which can lead to a dropping of the share price of the airline. Hiring External Consultant This measure can help a company to get an unbiased and objective opinion. But the problem with this alternative is that the consultant will not be able to comprehend the intricacies of the organizational culture. There are considerable chances that the recommendations that the consultant proposes might not be practical for the company. Another problem that can arise due to hiring a consultant is that there is a considerable likelihood of information leakage. This information can be of a sensitive nature that can bring down the share prices of the airline or harm the image of the airline. Market Driven Strategy The underlying rationale of using this strategy is that the airline needs to make customers and its market the focal point of its business operations. This will make the airline sensitive to the changes in the dynamics of these two aspects of its operations. To implement this strategy, the company will need to acquire information about its customers, market and competitors. This strategy will enable the company to view its acquired information from a total business perspective; a decision regarding how the organization’s business functions will deliver customer value and, last but not the least, will cause the required actions to be taken to provide value to customers. This initiative will make the organization’s culture systematically and entirely committed to the continuous creation of superior customer value in an efficient and effective manner. However, the implementation process and the time by which the benefits of this strategy will start accruing to the organization can be of a considerable amount. Merger This option can be explored by the organization if it wants to add complementary capabilities to its operations. If this is the objective, than the airline can find another airline that can add new capabilities to its operations and thus merge with it. However, the issue with this option is that there can be a conflict of cultures that can arise between the two organizations; this can have a profound negative impact on the fundamental objectives behind merging. Restructuring This can be a viable option. Since the organization is looking to cut its operating cost, so in this regard the organization can layoff some of its work force. But there is a considerable chance that this measure can be devastating for the airline, as it will completely ruin the organization’s culture and make the remaining workforce distrustful as regards the management’s intentions. Declare Bankruptcy This is the extreme end of the spectrum. This option is always open for the airline and is the much reverted to in today’s airline industry. However, though the airline is still not in such a bad condition to declare bankruptcy, it needs to come up with a turn around strategy. Selecting the Best Alternative The most viable alternative until now seems to be that of adopting a market driven strategy. This strategy is not at all harming the current fragile organization culture of the airline. It is rather trying to kick start the current stagnated organizational culture. This strategy will align the airline’s business processes with the needs and aspirations of it customers and with the current dynamics of its market. This will enable it to be cost effective and, at the same time, enhance customer loyalty. Gaining Approval and Support The team responsible for the implementation of this strategy will most likely be comprised of people from different functional areas. This team will need to work together in order to remove the obstacles which come in its path of implementing this strategy. The team will have to set effect control procedures in place and will need to get everyone involved in the implementation of this strategy. Implementing Decision After gaining approval from all the stakeholders, the team needs to implement the decided aspects of the strategy. Evaluation of Results The team should set a timeline for the activities it is going to perform in order to implement the decided strategy. In this timeline, the team needs to set points where it will review the progress of the various aspects of this strategy. In case the team finds any discrepancies in the progress of any aspect of the strategy, it should take rectifying measures to resolve those discrepancies. Aspects of a Market Driven Strategy In order to implement a market driven strategy, a company needs to work along the following aspects: Determine Distinctive Capabilities. Match customer-value requirements to capabilities. Achieve superior performance (Kotler, 2009) Determine Distinctive Capabilities It is of utmost importance that an organization makes an effort to identify distinctive capabilities or competencies. Capabilities can be defined as the complex bundle of skills, knowledge, and experience that an organization has gathered through its business processes. These processes enable a firm to coordinate its activities and utilize its value creating assets true potential (Kotler, and Keller, 2009). Organizational processes under the revised strategy Adopt a point-to-point route system as adopted by South West Airline. This system should be used for its business travelers segment, whereas for its other customer segment it should continue with its hub-and-spoke design. The carrier should have a different value proposition for both its segments. For its business segment, the carrier should have limited services as its value proposition, whereas for its other segment it should have a low cost as a value proposition. Skills and Accumulated knowledge The airliner should use its 25 years of experience to tailor its business processes to fit its value proposition. Coordination of Business Activities The airline should use its new point to point business model to coordinate activities across its business functions. Assets The company should work hard to develop its asset base, which includes having low cost operations, loyal customer base, and high employee’s morale. Providing Value to Customers The airline needs to identify its distinctive capabilities and use them to deliver value to customers by differentiating their offerings, providing low-cost services, and even a combination of low cost and differentiation. The company needs to decide which option it wants to follow, for it needs to match its capabilities to the best value opportunities. Market Driven Organization In order to be a market driven organization, the airline needs to develop an external focus. It needs to develop different capabilities which span across the business functions. In order to develop differentiating capabilities, the airline needs to build cross-functional teams, since many researches have found that by grouping people in teams in a company can harness the true creative potential of an individual. Also teams can help an organization to be responsive to its changing environment, since teams are flexible and highly adaptive (Anderson, 1982). An organization like Classic Airlines also needs to undertake serious efforts to clearly define its processes. This should be augmented by assigning a process owner to each an every process so that discrepancies can be easily traced back to its owner. In order to enhance the working capabilities of these owners, the organization needs to create effective channels of communication, which facilitate information sharing between important stakeholders of the process. The management of the airline should build systems that help in the coordination of inter connected processes. This will help ensure that work flows smoothly without any disruption. The management should build an organizational culture which is a reflection of a shared understanding of the carriers industry, target market, positioning sought by the carrier, and, last but not the least, the future trends of the industry (Haberberg, and Rieple, 2008). The organization should understand the needs and aspirations of its travelers and inculcate a customer centered attitude in the front line employees. The airline needs to enhance its service quality in every aspect of its operations. The airline needs to use its cross functional teams to come up with creative new service packages and travel tour packages. It needs to provide impetus for innovation so that the airline can use it to achieve operational excellence. Conclusion The Classic Airline carrier needs to improve their current position, as by continuing their operations in the same way the company is not going anywhere. It is important for the higher management to analyze such critical situation and then follow the recommendations that have been presented in the report to improve the profitability of the company. References Anderson, P. (1982). Marketing, Strategic Planning and the Theory of the Firm. The Journal of Marketing, 46 (2), 15- 26. Haberberg, A., & Rieple, A. (2008). Strategic Management: Theory and application. New York: Oxford University Press. Kotler, P. (2009). Marketing Management. Pearson: Prentice-Hall. Kotler, P., & Keller, K. (2009). A Framework for Marketing Management. New Jersey: Pearson Prentice Hall. Read More