Classic Airlines Marketing Solution - Essay Example

? It is widely believed that problems are part of everyday business and great problem solvers are better positioned to solve their s needs effectively (Zwilling, 2011). Simply put, a business may not exist if there are no problems. Against this background, this essay seeks to utilize the nine step problem-solving model to solve Classic Airline’s marketing problem. The paper starts by identifying as well as defining the problem and this is followed by application of the above mentioned problem solving model. The internal as well as external pressures contributing to Classic Airline’s current crisis will be discussed in detail and the essay will also seek to establish the marketing resources that are available to resolve the crisis. Classic Airlines is the world’s fifth largest airlines and has witnessed a steady growth in the 25 years since its inception. However, though profitable, the airline has not been spared from the challenges that affect airlines. For instance, increased uncertainty about flying negatively affected the stock prices which saw Classic airlines recording a 10 % decrease in the share prices in 2004. Its negativity has resulted in low employee morale where consumer confidence seems to be declining. Loyal customers also seem to be jumping ship and those remaining are flying less frequently. The airline has come under spotlight as a result of the seemingly mounting problems hence this essay seeks to identify as well as to define the problem bedevilling Classic Airlines. A problem solving model will be applied in a bid to try to address the airline’s current crisis. A close analysis of the case shows that there are both internal as well as external pressures contributing to Classic Airlines’ current crisis. The airline is operating in a competitive environment that is characterised by rising fuel while it is already incurring high operating costs. In a competitive environment, it can be noted that the companies will be fighting for the same customers hence the one with favourable services is likely to appeal to the interests of many customers. Whilst it has been observed that competition is fierce in the airline industry, it has also been noted that a closer look at the profiles of the other competitors shows that to a certain extent, some of them have a competitive advantage over Classic Airlines. The major strengths of the three given competitors indicate that they are dominant players in the industry and they have a global presence and a strong existing network in different destinations they ply. It has also been noted that these players have successful loyalty programs in place which is currently a problem that is affecting Classic Airlines. Its customer loyalty base is waning and a holistic approach has to be taken in order to revive its diminishing fortunes. Another notable strength possessed by the competitors is that they have worldwide brand recognition and they are likely to appeal to a large number of customers. There are also internal factors contributing to Classic Airlines’ current crisis and these include labour costs. The firm is paying top salaries especially to pilots and other employees while other competitors are cutting back pay on such professions. Priority is given to the needs of the workers and this has increased the operating costs of the airline. High salaries offered to the employees are not commensurate with the actual economic state of affairs obtaining on the ground. The stance to give the employees the autonomy to decide destinations through a bidding system is also a contributory factor to the current crisis being faced by the airline. The high operating costs have limited the airline’s ability to compete for valued frequent flier given that it is now confined in a restrictive cost structure. Thus, as noted by Ben Sutcliffe, Classic’s General Counsel, the main problem related to this approach by the airline is that it has one of the highest labour costs which are likely to jeopardize its future. This has mandated a 15 % cost reduction across the board by the directors of the company. This particular measure is meant to revitalise the operations of the airline so that it can regain its lost glory. Basically, a company with high operating costs such as labour is likely to face some problems with regards to its viability in the long term. In as far as gaining a competitive advantage by the company is concerned, it has to be noted that certain measures have to be implemented. It can be noted that there are quite a lot of successful business organizations in the market and these are strategically so viable such that rival competitors can hardly imitate their strategy. In order to achieve such a stable status in business, a strategy commonly known as competitive advantage can be applied to the organisation. Through his generic studies, Porter came up with a framework of what he termed competitive advantage. According to Porter (1985), a firm needs to have a competitive advantage in order to remain viable in the long run. In this case involving Classic Airlines, the cost advantage through cost leadership is applicable. A cost leadership strategy is where a firm seeks to lower its costs in its operations. Porter argues that a firm needs to adopt one two of the strategies in order to operate in a viable manner in the face of competition from other rival competitors in the same industry. As noted in the given case, the main problem affecting Classic airlines is related to costs which are quite high. This has negatively impacted on its endeavours to compete for valued frequent flier. The airline is also loosing loyal customers at a worrying rate and it has been discovered that in order to rein the situation, there is need for concerted efforts in lowering the operational costs being incurred by the firm in order to save face from the remaining group of customers. In order to solve the problem identified above, the nine-step model can be used. According to Zwilling (2011), this model is comprised of nine steps as going to be illustrated below. Development of the problem statement is the first step that can be taken towards resolving the crisis facing Classic Airlines. Thus, the problem of high labour costs is seen as the main one which is negatively affecting the viability of the organisation. The second step is related to identification of the potential cause of the problem. As noted, labour costs are high as a result of too much priority given to the needs of the employees which is seen as a burden to the company. Having established the potential cause of the problem, the net stage is to gather data as well as verification of the likely cause which leads to the formulation of a strategic goal. In this particular case, the goal is to reduce costs by about 15 %. The next step is to identify alternatives or solutions that can be implemented in order to rectify the problem identified in the given case. Among the solutions available, the organisation can cut on costs related to employee incentives or it can lure the customers through lowering prices. Loyalty programmes can also be implemented in order to appeal to the interests of the customers who are gradually waning. The next stage is concerned with evaluating the alternatives and a holistic approach has to be taken at this particular point. An alternative that is likely to bring about the best result is preferred. The next stage deals with assessing the risk as well as determining the best solution that can be implemented. In whatever decision that is taken in an organisation, there are risks likely to be encountered and these must be catered for. After assessing the risk, the next step will be mainly concerned with making the decision. Decision making should not be a sole responsibility of an individual but consensus must be reached among a taskforce of influential people in that particular organisation. In this case, all heads of different departments in the organisation should form part of the taskforce and the delegation must be led by the marketing executive officer. The marketing department is in a better position to know effective solutions that can be implemented in order to solve the identified problem. The next stage is concerned with implementation of the solution that has been agreed by different members of the task force. The head of the delegation can take a leading role in implementing the strategy that has been suggested. Different people will be tasked with playing different roles in the implementation of the agreed solutions. Having implemented the problem solving model, there will be need for the responsible authorities to evaluate the progress being made in as far as rectification of the problem identified is concerned. Evaluation can be done through comparing the company’s current state of affairs compared to the previous occasions when it was still facing some problems associated to the major problem identified. However, application of the problem solving model in a bid to address the problem identified is not an end in itself but a means to an end. The objectives and obstacles of the marketing department need not to be ignored. Whilst the objective of the marketing department is to lower costs, the obstacle likely to be encountered is that of resistance to any suggestion of a price cut since this is strongly opposed by the company’s chief executive officer. Without a holistic approach, it may be an uphill task to fully implement this strategy as there may be inadequate resources. In most cases, the success of each strategy is mainly dependent on the available resources but in this case it seems as if there is discord in taking the same decision that is meant to lower the costs in the operations of the organisation. Though there are likely to be some obstacles to be encountered during the implementation process of the suggested alternatives, the strategy to lower prices is justifiable given that in a healthy business environment, operating costs should be lower that the revenue generated by the organisation. If operation costs are high, the price of the products or services offered may be forced up so as to compensate the void created by the high operating costs. As noted in the case of Classic Airlines, the customers are price conscious and this is the reason why the airline has been failing to to compete for valued frequent flier. Like in any other business, the operating costs have to be lower than the total revenue generated from the operations in order for the company to be profitable while at the same time managing to sustain its operations. Whilst employees are valuable to the company, their needs and interests should not be allowed to override other pertinent issues that drive the daily operations of the company. Efforts have to be made in order to implement customer relationship marketing (CRM) which is vital in as much as customer loyalty is concerned. Customer loyalty is very important in as far as long term marketing success of a company is concerned. Thus, marketers who are enlightened realised that it is important to forge long lasting relationships with their customers in order to promote the viability of their businesses. Strydom (2004) posits to the effect that CRM a philosophy emphasises forging long term partnerships with the customers and this can be achieved through offering value and providing satisfaction on a consistent basis. Repeat sales are likely and this can lead to a reduction of costs since it is cheaper to save an existing customer than looking for a new one. This is very important especially to firms operating in a competitive environment and this strategy must also be given consideration by Classic Airlines. CRM can play a pivotal role in turning around the fortunes of the above mentioned airline since loyalty among the customers is likely to be created. Over and above, it can be noted that problems are an integral part of the operations of any business. Without problems, business can cease to exist. A close analysis of the given case study showed that the main problem facing Classic Airlines is related to high labour costs which have indirectly affected the viability of the organisations. The needs of the employees are given unbelievably high priority at the expense of the customers and this has resulted in the airline gradually losing a sizable number of loyal customers. It has also been discovered that competition is also responsible for the current state of affairs at the airline. However, in order to solve this problem, it has been observed that the nine step model for solving problems is ideal for this particular case. On top of implementing this problem solving model, it is also imperative for the organisation to embark on a customer relationship marketing drive in order to create loyalty among the customers. Bibliography Armstrong, G. & Kotler P. (1996) Principles of Marketing, 7th Edition, Englewood Cliffs: Prentice Hall. McCarthy, J.E & Perreault, W. D. (1996), Basic Marketing: A Global Managerial Approach, 12th Edition. NY. Irwin McGraw-Hill. Porter M.E. (1985), Competitive Advantage; Creating and Sustaining Superior Performance. New York: The Free Press. Smith, P.R. (1999), Great Answers to Tough Marketing Questions, London. Kogan Page. Strydom, J. (2004), Marketing, 3rd Edition. CT. Juta & Co Ltd. Zwilling, M. (19 July, 2011). Nine steps to effective business problem solving. Retrieved from http://articles.businessinsider.com/2011-07-19/strategy/30065949_1_problem-solution-entrepreneurs Read More