Strategic Operations Management and Marketing Management of Classic Airlines - Essay Example

? Market Solution Market Solution Identification of the problem ic Airlines is one of the most successful airlines operating today and happens to be the fifth best airlines operating around the globe. The success of the company can be measured through the fleet of 375 aircrafts that are operational in more than 240 regions at a daily average of more than 2300 flights. The organization employs a large number of workers; currently there are 32k individuals working for the airlines and the organization has earned a total of $10m during one year while $8.7 billion have only been earned by the sales department. The organization has experienced various recessionary periods but has always been able to operate in a profitable manner. Recently, the organization experienced a drop in the share prices by 10%. The organization is said to be suffering from low employee satisfaction as reported by popular media such as the Wall Street. The organization has even started experiencing a decrease in customer loyalty as the organization has seen a decline in the enrollment of the customers in the Reward program of the organization. The airlines witnessed a 20% decline in the customers enrolling in the reward program and they have started shifting towards the competitors of the airlines. The airline is even suffering from the issue of an increase in the operating costs due to increased labor and fuel cost. The organization can alter its problematic situation and can earn higher profits. Its problems can help it grow and attain success; they need to carefully handle the entire problematic situation. While dealing with the issue of decline in customers, the airline needs to distinguish between its essential customers and everyday customers. They need to provide more personalized services to certain customers which will help the airlines to gain attention in the market. The customers will further help the airline in increasing their customer base. Satisfied customers will pass on satisfactory messages to other consumers which will result in an increase in the customers for the airline and will further help in decreasing the overall marketing costs. One of the major changes that the airline needs to make is to change its current reward program. They can enhance their reward program by creating a program or changing their current program after analyzing the programs that are created by their competitors. Altering the current reward program of the airlines will enhance customer satisfaction and consumers will start giving preference to the airline’s reward program. The airline even needs to focus on how to decrease their operational costs. One such method is the introduction of winglet which will result in decreased consumption of fuels by the aircrafts. Several problems related to the airline have been identified by the different stakeholders of the company. Stakeholder issues need to be considered while solving the issues of the company because these stakeholders lead to the success and failure of the organization. The stockholders of the organization are of the opinion that the share prices of the organization have declined very sharply and this is hampering their investments. They believe that the share prices of the organization can be increased if the organization starts satisfying customers and customer loyalty is one of the essential things that need to be created in the market for the success of the company. The management is of the idea that the organization is not completely fulfilling the needs of the consumers and once these needs are fulfilled, consumers will start becoming loyal to the organization. Employees of the organization are mainly concerned about the negative reviews of the organization in the popular media. The employee union of the organization is concerned about job losses, decrease in salaries of the workers, dissatisfied workforce and they want to ensure that workers are compensated equally according to their hard work and performance. Similarly, the government and the officials of the areas in which the airline operates are concerned about the decreased revenue they are earning from the airlines and the customers of the airline want upgraded services and change in the negative reviews of the airline as stated in popular media. In order to operate successfully, the organization will need to consider all the issues suggested by different stakeholders of the company. The organization even needs to fulfill the promises of better working conditions and high paying jobs to its employees. This is essential in order to gain the confidence of the labor union as well as the employees. The organization needs to address the problem of decline share prices in order to reinstate shareholder’s confidence in the stocks of the organization and to attract new customers. Defining the problem The main problem that is experienced by the organization is a decline in its customer confidence and its current low position in the industry of airlines. The organization’s main aim is to make profits while making sure that they are on the same page with the competitors. The organization can accomplish its targets and solve its problems with the assistance of exploiting opportunities that are available to them and by changing the strategy of marketing. The organization needs to implement new technology and has to strengthen its position in the industry of airlines. Targeted Vision The organization’s current vision is to maintain its position as the world’s fifth best airlines in the entire globe and to attain this vision it should work hard to attain customer confidence and increase profitability by increasing its current customer base. The airline even needs to increase the enrollment of customers in the reward program of the airlines; it can achieve this target by altering its current reward program with the assistance of other markets and industries that are related to the airline business, such as the tourism industry. The airline even faces the challenge of decreasing its operating cost and to attain this target it needs to make technological changes. Identifying Various Solutions One of the solutions to the problems experienced by the airlines is benchmarking, while conducting benchmarking the organization needs to compare its current operational activities with the activities of the competitors and the best practices established by the industry (Codling, 1995, p.34). After the comparison has been conducted, the organization will figure out gaps in its current operations and the operations of the competitors. After the gaps have been identified, the organization needs to fill in the gaps in its current operation to comply with the targeted practices. For example: one of the competitors of Classic Airlines is Southwest Airlines which has attained great success in terms of reducing their cost of fuel consumption. The technique applied by Southwest in order to reduce its cost of fuel consumption was adopting the technique of hedging and this technique safeguarded the airlines from the issues they would have experienced as result of tremendous increase in fuel prices (Lauer, 2010, p.163). Hedging is a term used to refer to the activity of an organization purchasing and selling fuel stocks in the future of the fuel commodity trading. The benefit of hedging can be realized by the fact that during the middle months of the period of 2008, Southwest was able to declare a profit in the period while other competitors of Southwest continued to face heavy losses as a result of increase in oil prices. This allowed the organization to continue to lead the industry and the industry was able to purchase fuel only at the rate of $51 as compared to the high prices at which its competitors were purchasing fuel. Classic Airlines can either implement this solution or they can implement the solution of decreasing their budget for marketing, while marketing can be conducted through means of customer satisfaction which can be obtained through better services provided by the organization. To address the problem of decreased customer satisfaction, the organization can meet various needs of the customers. The customers of the airlines have provided insight about their needs by the top level management is making no move to fulfill these needs (Saxena, 2009, p.206). The organization can provide services such as air fares that are completely refundable without charging any fees as penalty. This will persuade individuals to purchase seats with Classic Airlines as they will be sure that they will not be charged with extra money if they will need to postpone their flight due to unknown consequences and this is a much favorable option as the economy is already experiencing a decline. The airline can resort to segmentation strategy and segment consumers according to their needs and create packages that fulfill their needs. For example: Business travelers feel a need to gain internet access during air travel so they can continue operating. This need can be fulfilled by providing internet access to business travelers. Market segmentation and delivering according to the needs of individual consumers will even assist in increasing the enrollment in the award program of Classic Airlines as more satisfied customer will try to attain more benefits by enrolling in these programs. Associated Benefits Once the organization has identified various alternative to solve the problems it is facing, the organization needs to conduct a thorough analysis of the alternatives it has figured out. While conducting an analysis of the solutions, the organization needs to conduct a cost and benefit analysis. While conducting the cost and benefit analysis, the organization needs to consider the costs and benefits associated with each alternative available to them. The cost and benefit analysis will help the organization in differentiating those alternatives that produce more benefits for the organization than any other alternative that the organization may use to solve the same issue. For example: the costs associated with selecting the hedging option is that if the oil prices in future decline, this would lead to increase cost of fuel consumption and the benefit of this option is that if in future the fuel prices increase, the organization will obtain the benefit of reduced fuel cost consumption. Second option available to the organization is of implementing segmentation technique in which the organization will create packages while keeping in mind different groups of customers. This option will provide the airline with the benefit of premium prices that they can charge for customized packages and the customers will even be ready to pay premium prices because they will be getting value for money. Associated Risks The risk associated with the option of hedging is that the organization may have to pay for higher fuel prices if the fuel prices in future decline. The risk associated with the option of market segmentation is that if the customers perceive that the benefits they are getting for the amount of money they are paying are low, they would not be ready to pay premium prices and this would result in loss of money that the organization will spend on installing new technologies to meet customer demands. Selection of Solution There is a risk associated with the adoption of hedging technique, and the up side of the technique of implementing segmentation strategy is quite huge, thus the organization should opt for market segmentation technique. This technique will be a solution to all their problems include: increased operational cost, decreased customer loyalty, decreased share prices and decreased enrollment in Classic Airline’s reward program. Market segmentation is a solution to the problem of value for money. Since individual consumer needs will be satisfied as packages will be developed in accordance to individual consumer needs, the consumers will perceive that they are getting value for the amount of money they are paying (Brown, 2005, p.20). If consumers will be obtaining value for money, they will be ready to pay higher prices which will help in countering the effect of increased fuel cost. Secondly, increased prices will increase the revenue of the organization through which employees can be paid well and this will result in increase in employee morale. Increase in customer satisfaction will even increase enrollment in the Reward program. As the organization will start making profits due to premium prices charged from customers, the organization’s stock prices will even rise. Solution Implementation While implementing the solution, the organization will need to take every individual working in the organization into consideration and obtain their ideas and views about the solution. They need to consider advices from the lower level staff while deciding upon the packages they plan to create for different customers. Lower level employees’ involvement in the solution implementation is essential as they are in direct contact with the customers and they are the ones who are well aware of the needs of the customers. There is only one issue in implementing the solution, the problem is that the top level management is not in favor of utilizing this technique. The managers can come over this problem by informing the top level management about the current declining conditions of the organization and how the new solution will benefit the entire organization. Evaluating Solution The best method to evaluate the effectiveness of the solution is that the organization can compare the performance that the organization has achieved after the plan has been implemented with the performance of the organization before the implementation of the solution. If the customer enrollment in reward program, stock prices, and employee morale has increased, the solution has been successful in achieving its purpose. Conclusion The problems experienced by the classic Airlines is that they have witnessed a increase in their share prices, they have even witnessed decrease in employee morale and decrease in enrollment in the Classic Airlines Reward program and they have experienced an increase in their operational costs due to decreased employee morale and increase in fuel prices. All these problems can be solved with the assistance of implementation of market segmentation in the marketing strategy which has long been neglected and avoided by the top level management. References Brown, S. (2005). Strategic operations management (2nd ed.). Amsterdam: Elsevier Butterworth-Heinemann. Codling, S. (1995). Best practice benchmarking: a management guide. Aldershot, Hampshire, England: Gower. Lauer, C. (2010). Southwest Airlines. Santa Barbara, Calif.: Greenwood. Saxena, R. (2009). Marketing management (4th ed.). New Delhi: Tata McGraw-Hill. Read More