Consumer Decision Making and Competitive Marketing Strategies - Assignment Example

Decision making The aim of this assignment is to critically evaluate and examine the future decisions and the issues which arise in connection with these decisions; it is also essential to evaluate what decisions will be the most beneficial, what factors they will involve and what will be necessary for the decision making process to take place. Identification of the problem As it is known, there is a number of theories relating to the decision making process, but it is better to use the models of soft model decision making, and it will be also essential to point the reasons of choosing this model. The principal issue identified and to be analyzed in the present work is connected with the growth of passenger traffic; this issue is to be analyzed through the use of multi stage decision making process. The issue will first be illustrated, and then it will be necessary to identify the importance of decision making process for the company; the major part of the work will e devoted to the detailed structured analysis of the issue and application of the soft system technology to it. Conclusion will summarize the acquired information and will make it possible to define the best solutions. Last year more than 50% of total passenger traffic was generated within North America and Europe, with Japan accounting for an additional 4% from domestic or international flights. These three regions equate to more than 70% ($US400 billion) of airline revenues. However the picture will change dramatically in the next five years, due mainly to the emergence of China and India as economic superpowers set to capture about 15% of expected growth in global traffic. It is clearly seen, that the issue to be discussed in the present work is how to keep the existing market share in the global traffic and how to attract additional customers to the area of the North American and European airlines, so that with the emergence of China and India as new super powerful economic states these market shares should not be threatened to minimize. It is obvious, that possessing significant market share in global traffic and especially airline needs constant attention and decision-making, because the threat of India and China occupying its considerable part is based on objective reasons and grounds. However, on the other hand, these assumptions may underlie another aspect - tending to stability and knowing the quality of the services provided by European and North American airlines many customers would not be willing to change the supplier of these services, that is, the airline company they usually use for traveling on business or entertainment. Background The starting point for any aircraft demand analysis is clear understanding of the issues driving air transport and the way in which they relate to the future air traffic and aircraft capacity. Airbus' traffic forecast process is based on four major building blocks, and it should be noted that these building blocks are also important to be known in the present decision-making process. These are Brand, Emerging Markets, Human Assets and Technology. The two aspects which will be taken for analysis here are Brand and Technology. It will be essential to see how these two aspects of the airline business should be involved into keeping the present market share and what decisions should be made in relation to these two aspects to make them work for the benefit of the leading world airline companies. These will be taken as the two major issues or challenges to be faced by the companies in the nearest future and thus appropriate decision-making techniques should be chosen. (Isenberg 1996, p. 778) It is stated, that airlines based in Middle East and Asia are expected to develop more quickly than airlines based in other regions, growing by an average of 6.4% and 6.2% respectively. This is fuelled by the aspiration of airlines and in some cases the countries themselves, as well as access to bourgeoning markets driven by liberalization and a growing propensity to travel. But for the companies which are now the leaders of the airline traffic market, these growing markets are seen as serious potential competitors, and thus these companies should create a line of decisions based on serious theoretical and practical considerations. The companies which used to be the leaders of the market now suffer from the pressure of emerging markets, which offer more competitive and attractive conditions for those who need their services; these attractive features are mostly seen through the lower price (mainly the price of the workforce). However, Brand and technologies are the two principal aspects which emerging markets and their companies don't possess to the same full extent as the developed companies do. Thus, the question is how to protect the developed markets from the competitive rivals and how to expand the amount of those who would prefer to use the services of the stable and well established airlines, rather than be attracted by cheap services of unknown suppliers Problem solving and decision making It is essential to understand that the process of decision making is a complex of actions. 'Decision making is the process to make a selection between diverse courses of action' (Hicks, 2004). This means that it is necessary to spend a big amount of time for the definition of the right decision. The complexity of the organizations especially in the sphere of tourism and hospitality business is growing due to understanding that the growing extent of competition requires more thorough approach towards decision making in this sphere. It is important to understand the complexity of the organizations at present, which will ultimately lead to the correct choice of decision making models and their adjustment to the conditions of the present market. The amount of the transformational models applied at the fundamental level of decision making is enough to choose and have the right model to apply to the specific situation, but it is also understandable and can be stated, that it often happens that correct decision making and the right choice of the decision is vital for the development of business and its position on the market. The issue for the airlines in tarrying to keep the existing market share and to increase the number of consumers will be faced by the leading airline companies in the future; moreover, with the growing number of people who tend to use airline transport and traveling, the challenge acquires new growing scales. On the one hand, this problem may seem hard (which means that it is easy to define and evaluate the existing information and the outcomes of the decision making process will be absolutely predictable), but in reality accounting all the changeable aspects, especially market requirements and changing brands and technologies, this problem can easily be related to the sphere of soft problems, and thus soft technology decision making will be the most appropriate process here. The principal objective here is to keep and grow the number of the airline customers (thus, keeping and growing the share of traffic between the continents) through the wise use and application of the methods of branding and new technologies. New branding and new technologies will certainly influence the choice of consumers, and it is suggested that it may influence their choice, because while it will improve the general quality of the provided services, it will also make the existing customers get used to the new ways of receiving these services, which should not be forgotten. The similar line here may be made with restaurant business - while trying to tend for selling healthier food and changing menu for the attraction of the new customers, they are at risk of losing those customers who didn't care about health aspect and safety of the food and were buying it for taste. (Schwenk 1995, p. 477) Soft systems technology and decision making for the assignment Before using this method stage by stage it is essential to identify its main advantages and steps, which will make it clearer and easier in application. Soft System method is the one which is designed to assist in decision making for the managers of any level. The principal benefit of this method is that it is almost universal and applicable to various spheres of management. It covers the wide range of situations and it is meant for changing the problem situation. The principal stages of the soft systems methodology can be defined as follows: problem situation unstructured; problem situation expressed; root definitions; deriving conceptual models; comparing the conceptual models with the real world; defining feasible models; taking action. (Kirk 1995, p. 24) It is seen that the model is rather complex and implies many aspects to be considered; however, it is seen that there are other decision making models, which are simper and can be used for the analysis of the present situation. If we take rational model, the four stages of decision making will be involved: identifying the problem choosing alternative solutions; selecting the solution; evaluating the solution. (Simon 1999, p. 497) Though the stage of comparing the solutions to the real world is not included into the rational model separately, but it can be implied at the stage with selecting the solution and can be used for the selection of the most appropriate one. Speaking about Branding, and applying the present decision making techniques, it is essential to start with identifying the problem and with evaluating the current knowledge we have. Rational decision making - branding and technologies The problem sounds like looking for the ways of expanding the market share of the current airline leaders through the use of technological and branding techniques. The current knowledge which we possess and which can be used for the efficient decision making is that in the nearest five years the emerging markets of China and India will start to compete with the existing airline leaders. The market share which accounts for the North American and European Airlines will be decreased by 6.2% and 6.1% respectively for the benefit of both China and India. (Shaw 2004, p. 79) Thus, the information which we possess in this situation means that there should be found rapid and rational solutions as for how to keep this volume of market share. We also have the knowledge in relation to the use of branding and technologies; branding is the means of connecting the knowledge consumers have about product and its association; branding often appears to be the sign of quality which does not need additional characteristics for the consumer to buy the product of certain brand. Technologies, on the contrary, make the product more complex, on the one hand, and simpler and more convenient for the consumer, on the other hand; however, how in this situation we should behave - is it more beneficial to discuss branding and technologies separately, or make the brand carry the notion of technology and represent the airline trademark through the technological brand (Shaw 2004, p. 27) These are the two solutions in which one has to find the best and this solution will be one. Let's see how both alternative decisions will work in the case with airlines and which of them should be chosen. There are some pros and cons of the rational decision making model, and before we select the appropriate decision they should be identified here. A rational decision making model presupposes that there is one best outcome. Because of this it is sometimes called an optimizing decision making model. Such a model also presupposes that it is possible to consider every option and also to know the future consequences of each. While many would like to think they know what will happen, it is far not always so. However, having chosen this model we will have to analyze possible consequences of each action suggested which will lead us to the one most appropriate decision. Taking the alternative of using technologies and brand separately, the line of decision and action may look as follows: Using new technologies for convenience of the customers - allowing customers use various online services through traveling (or allowing customers using technologies for faster servicing onboard) - reducing the traditional costs directed at traditional servicing - attracting additional customers by increasing the quality and speed of servicing. Branding - inventing new brand for the airline - analyzing the characteristics which are the most desirable by the present day travelers - including them into brand and associating it with these characteristics - attracting new customers by offering them the set of services they have not been able to find in other companies. (Lee 2001, p. 53) This one decision is ultimately divided into two separate solutions, which means that the efforts should be followed into two different directions which also means not their concentration, but spreading which is not very desirable in this situation. For the aims which were identified in this work, it is beneficial if all efforts are directed in one single direction and thus it is essential to look at another alternative - creating brand which will be connected with the use of technologies and inventing the so-called 'technological brand'. The development of technologies in the modern world is very rapid; the consumers thus become more demanding in relation to the amount of time they spend on intermediate services, like booking flight, for example. This procedure can be improved through the use of the new technologies, and thus attracting new business travelers who value their time, and count their money. Combining branding and technologies is also beneficial because it concentrates efforts in one direction and allows inventing one single solution. The line of this solution may look as follows: Creating new technological brand - offering customers new technological solutions before they board the plane, and onboard, as well as afterwards before they leave airport, making the service more comfortable, and providing all these services with one brand - attracting new customers by the quality and speed of service, simultaneously making them associate the chosen brand with the technologies the company uses. (West 2005, p. 114) Thus, we are here coming to the conclusion that the second solution is more beneficial through the already described characteristics. However, the rational model will look fuller here if we apply a part of the soft system methodology - comparing the chosen solution to the real world. It has been already said that with the rapid development of the new technologies customer require new approaches of the companies which provide them with the services, they use often or even daily. The real world displays the conditions in which competitive markets often win the competition for the account of the absolutely new radical solutions. In the case which is described here, technological branding may become a radically new approach and will change the 'appearance' of the airlines, but the benefit of this approach is that it will not lose its permanent customers. The use of additional new technologies is not changing the menu of the restaurant; it does not require the customers change their way of thinking; it just gives them more opportunities to save money and time and to receive the higher quality of servicing. (Shaw 2004, p. 91) Evaluating the chosen decision, which is the last stage of the decision making process here, shows that the chosen alternative is beneficial for attracting new customers who have not found the same quality of service in other companies, and especially the business sector of clients who value their time and want to receive and use the high quality of service for the moderate price. Conclusion While there is high risk that leading markets will lose their clients in airline business for the next five years, with China and India emerging and offering their services, it is clear that applying a decision making process (the rational one was used in this work) may allow finding the best solutions for not only keeping the present market share, but also for attracting new clients. The decision making model which was used here, has allowed coming to the conclusion that the use of the new technological brand will be beneficial and one of the best steps in the designed assignment. It often happens, that decision makers are not able to create the necessary objectives and alternatives, and are not able to objectively evaluate the existing techniques and information. This is again it is essential to properly address the existing decision making techniques. The difficulties in making decision can be of various characters: they can be structural, and organizational, as well as emotional; moreover, complexity which is involved into the process often becomes the obstacle for taking the most appropriate decision. Decision making models are designed to solve these problems as well. They account various factors, as well as uncertainty. Hicks (2004) mentions that 'decision should be evaluated based on that is known at the moment, and know how to use this information'. This should be taken as the basic level in decision making and it will be seen that evaluation of the existing information and figuring out how it can be used in further decision making process is one of the initial points of any such process. Critically evaluating the present viewpoint, it may seem that the author is absolutely correct, but on the other hand, it is still under question, whether looking for the means of using the existing information should be made at the first stage of the decision-making. For example, Knippen (1997) makes evaluation for from taking the first stage of decision making, stressing on the need to first identify the real problem, and to develop every possible solution, which will ultimately give the necessary basis for choosing the most appropriate one. Thus, evaluating the existing knowledge and information can be done only as following the problem identification; otherwise it will hardly be possible to understand what exactly information is needed in relation to the existing problem. References Carr, J 1998, 'Consumer decision making and competitive marketing strategies: Applications for tourism planning', Journal of Travel Research, 26 (3): 28-44 Cole, S 2005, Applied Transport Economics: Policy, Management and Decision Making, Cogan Page Hicks, M 2004, Problem Solving in Business and Management: Hard, Soft and Creative Approaches, Chapman & Hall. Checkland, P & Scholes, J 1992, Soft Systems Methodology in Action, Wiley, Chechester. Golub, AI 1997, Decision Analysis: An Integral Approach, Wiley & Sons. 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