Continental Airlines Strategies - Resulting Outcomes - Case Study Example

Longitudinal Strategic Development Study  Selecting one company from the list at the end of this section, undertake the following:  1. RECENT PAST: (assessment criteria 1,2,3,5,6) Strategies deployed and resulting outcomes- recent strategic development history. Research, describe and give a succinct account of the strategic development history of the company you choose set within the context or the industry to which it belongs over the past 5 to 25 years, choosing the duration of time for the study most appropriate for understanding the recent strategic development of the company. Avoid making just chronological lists of events from websites and in particular identify the strategy(ies) that the company has been pursuing and any changes in strategy that the company has made during the period under consideration and their outcomes and consequences for the strategic situation which is the subject of the following section(1000 to 1500 words)  "The airline business is a roller-coaster ride," says Continental Vice President and CIO Ron Anderson-Lehman. "It goes up and down, feast or famine." Without a doubt, this holds true for the airline industry which remains to be an extremely volatile company. Only ten years ago, Continental was in array of dismay as one of the ten major US airlines companies that failed to provide sufficient customer service. Plagued with customer complaints, overbooking, and denial boarding; the company was heading down south in a hurry. It filed for Chapter 11 bankruptcy multiple times and continued to struggle to attract any customers. One of the most prominent companies now in the airline industry itself is Continental airlines. The fourth-largest airline industry in America, which was initiated in Houston has been implementing so different strategies post September 11. Much of the strategy for Continental Airlines is to invest on customer related products, increase its routes while keeping the prices steady. Although the company has posted a hefty $68 million net loss, many experts insist that the trend will continue to go upwards. In the past decades, the company has been keen in increasing its customer base. It has also identified its loyal customers and continues to offer them many rewards such as a rich media experience during the flights. Moreover, the company has been able to flourish in domestic flights. Luring new and more profitable customers has become another goal for Continental Airlines. Utilizing a customer value model enabled Continental to gain a much better understanding of their customer and their profit model. Every month, Continental conducts a customer value analysis which adds tremendous business value to their already growing model. For instance, after September 11, Continental continued to improve and implement this model to gain a better understanding of its customer market. Hence, it enabled them to reach new horizons by providing more services internationally. During the 1990’s, the company was hit with a major challenge as the tire industry burst causing loses to the airline industry. Hence the target become to lower the cost of the tires, a challenge that Continental could not withstand as its revenues took a strong hit. Surprisingly enough, the company made a strong effort towards accumulating revenue and managed to acquire many other subsidiaries. Clearly, the old strategy in this particular case was to keep the expenditure costs low. The company was clearly struggling internally to report profits in its divisions. However, the strategy of the company during the 1990’s dramatically changed. Prior to the advent of technology, Continental did not drive much attention to attracting customers. It received low marks by the department of transportation. One of the biggest issues that haunted the company was the fact that data was not available. The company’s mainframe system was limited in its capabilities and created chaos. Each department had its own way of reports and synchronization became a challenge. More importantly, the company lacked infrastructure of accessing information and head executives did not have channels to gain customer support. Hence, the company had many obstacles to overcome. Without properly analyzing the business environment, it lacked key resources for conducting successful business. Much emphasis was based on reducing operating costs as mentioned above. A system supplier that delivered all the essentials to the company was needed by Continental. However, the company was inadequate of solving its own technological problems. Technological development became the main emphasis as the company transitioned into the new era. 2. CURRENT: Current Strategic Situation. (assessment criteria 1,2,3,4,5,6) Undertake an evaluation and appraisal of the company’s current strategic situation at the time of writing which relates to the previous section, using any research sources appropriate to support your analysis. Pay particular attention to the company’s strategic macro, industry and competitive environment, changes and trends in that environment and the company’s endowment of internal and  18  external resources, capabilities and organizational structure emanating from decisions made in the recent past. Give a synopsis of the company’s strategic situation in a way which is meaningful for the strategic choices it is able to make for the future which are the subject of section 3 below (1000 to 1500 words)  The enlightenment era for Continental began in 1994 when Gordon Bethune took the chair for President. Greg Brenneman, served as a Continental consultant, devised a strategy critical for its success. The first strategy was known as Fly to Win. This was a strategy that Continental embedded in order to understand and gain better insight about its customer base. Interestingly enough, that meant investing right now and having a better future net cash flow. The second strategy that Continental incorporated was known as Fund the Future. Undoubtedly, it needed to seek another financial strategy so it can alternate its cost and cash flow. The third critical point towards that was a push for reliability. Plagued with customers’ complaints from the past, making reliability a reality became an urgent point for the company. Lastly, collaboration became a critical component towards creating a dynamic culture where harnessing the growth of employees was emphasized upon. A key issue in both scenarios was to address the issue of emphasis towards international flights. Since the company wanted to penetrate the European markets, it became essential that if Continental wanted to compete at a larger market, is must do so expanding its horizons in Europe as well. The emphasis from quantity to quality became a key ingredient towards the reformation of the company. Instead of acquiring other airlines earlier, Continental shifted its attention in internal affairs with a stronger push towards its core principles. Within in its own realms, much attention was diverted towards employee and management obligations. The goal was modified from preventing losses to gain customer loyalty as the picture of long-term sustainability and growth became the primary vision. Implanting profitability towards a new growths strategy required a strong push towards decentralization within where the losses and profits were solvent. Lastly, it creating internal competition became a vision for the company to improve the core dynamics of personnel relationship. Another aspect of change that was rooted deeply in the principles of the new growth strategy was to decentralize the hierarchy within. In the wake of a new corporate leadership, the organization divided the company into small divisions in which small profits became a critical aspect towards success. The whole point on this strategy was to hold management more responsible for its actions and improve the relationships of personnel. With its employee relations improving, Continental continued to excel in customer service and its reputation. The IT team installed some key components in this system which enabled the company to save around $6 million in operating costs. It also consolidated the airline’s CRM database. The CRM database became a complete tool that enabled the company to reach new heights. Equipped with new insight and technology, the company forecasted the unit cost of each individual who traveled to different destination. In essence, it enabled Continental to be extremely efficient with its business and revenue model. What does Continental do that is different from other airlines? First and foremost is the fact that Continental has taken a drastic new approach towards their core dynamics of customer service. The new approach was not only to change their IT principles but to implement the utilization of Real-time business intelligence. This new form of intelligence allows the company to receive some financial boost. Larry Kellner, President of Continental insists that this innovative approach has taken the company by a storm. One of the key benefits of business intelligence is portrayed through flight attendants. Continental flight attendants are required to face customers and provide them with excellent service in order to establish a solid reputation. In addition, Continental’s staff monitors real time service of flight schedules, Itineraries, possible delays, and any other critical issues. This allows Continental to clearly customize their work reports and focus on individual customers. In essence, a push towards custom individualization became their focal point. In order to facilitate the pricing issues, Continental also embedded real life pricing modification techniques that enabled them to give special discounts to their customers based on reservations from past. As mentioned above, the strategy was drastically different from ten years ago. It embodied the hallmark of their turn around from “worst to first.” Continental reported more than $500 million in cost savings and revenue accumulation also drastically increased. Their future goal is to continue providing Elite Access. Another main focal point that the organization embedded in its system was the utilization of an IP geological system. Each individual that was a member of a continental.com was able to track down their destination with more facilitation and ease. Travelers were able to select their country and navigate to the adequate site. What this did is allowed the customers to browse the website more, which resulted in more business. Customers hated waiting for the webpage to load which was why the company suffered in sales. By adding this feature, Continental dramatically increased its turnout rate. The marketing team emphasized a great need to match the countries with its customers so that it can forecast the demand for routes going domestically and internationally. Penetrating the new market niche by exploring information systems was a dynamic boost towards the company’s confidence. The push towards a better system was the focal point since it marked an era of IT development and infrastructure. Clearly, with heavy emphasis in research and development, a need for more complete systems integration was derived. Continental pushed for a new IT infrastructure and reaped the results as gained 4% of revenue. "TPF is an old 1960s system that all the airlines are married to," says Mike Natale, Continental's staff vice president and CTO. "It's a very inflexible system, and it wasn't designed for customer service." Cleary, this became its competitive advantage as other companies were still in midst of addressing the high prices in tire. 3. FUTURE: Strategic Direction for the future (assessment criteria 2,3,4,5). Based on your research and analysis undertaken for sections 1 and 2 above, explore a limited range of distinctively different choices of your own creation available to the company for the future. Evaluate and assess the choices available leading to recommendations for the company of your choice’s strategic route forward. Make clear the assumptions you have made and present your recommendations in a way that accommodate uncertainties and changes that might occur to the recommendations in the event of the occurrence of specified contingencies or changes in assumptions (1000 to 1500 words)  The question remains, what is the future for Continental Airlines? Clearly, much of the emphasis remains in enhancing the customer service experience from a business aspect. In order to offer an enriching flight service, Continental has added DirecTV in its flights Offering a points rewards system will continue to keep Continental Airlines “sky high.” The higher point of emphasis continues to be the employee dynamics at the work place. Plagued with worker strikers, the company must attempt to address and structure its hierarchy in a manner that would benefit the company from internal issues. Continental is a very robust company and must address the risks that can be mitigated in order to benefit the company. Continental has many internal and external issues that continues to be the focal point for the organization. From a financial standpoint, Continental is involved in certain risks and uncertainties that can hurt the company. These risks compromise of many factors. First and foremost, is to calm the relations of employees with the head management. The recent employee strike that that the company was plagued with in 2011 was the cultivation point of the corporate dynamics that needed to be addressed. If the company fails to motivate its employees, it will be in no doubt of grave danger of loosing its corporate principles and integrity. Looking forward, Continental has created future strategic goals to match its company’s policies. First and foremost is the principle of security. Continental’s future is to provide a safe flight service for its customers. One cannot diminish the fact that airline companies have to enforce strict procedures for traveling for its customers. Hence, the goal for the company is to provide a better airline service as the customer enters the airplane. This is centered on providing comfort and leisure to its customers for little or no cost. The company also has to refinance its long-term debt, an issue that should be addressed right away. Hence, Continental has made a decision to focus on its customer service to acquire sales rather than focusing on keeping its costs low. The strategy is to enter the markets in Europe and internationally and create an atmosphere of competitive environment where it can take future customers away from its competitors. Hence, the company's strategy is quite simple, which is to identify and increase the loyalty of Continental's customers while attracting new customers. In order to achieve that, Continental is going beyond the traditional methods of doing business as it is depending the on a an innovative IT department that is creating automated tools, boosting efficiency and sharpening business intelligence to help return the carrier to profitability and make it a favorite among the flying favorites. In addition, new legislation of airport security will continue to be a main challenge for the airline company. With the recent conflict in Middle East brewing, both Continental and the government must collaborate closely. It will be no doubt an obstacle for Continental to continue to provide excellent customer service in midst of all this. Moreover, the company has to address the volatile gas prices that continue to fluctuate at a higher price level. With the new recession plaguing the nation, Continental needs to revamp its strategy. By focusing in more domestic flights, it can help its cause by lowering service costs. Providing supreme customer service should continue to be the main penetration point for Continental. The biggest challenge as mentioned above will be costs. The recession has no doubt eliminated any hope of the economy thriving and Continental does have long-term debt that it must continue to pay off. It also has to address its net operation losses since it has to maintain a high level of service for its customers. Continental should halt acquisitions and continue to pay its long-term debts as it sales slowly get back at a higher level. Lastly, enhancing corporate dynamics is a must also. Personnel must continue to collaborate at a higher level and internal service should be motivated to do better. Establishing solid relationship with customers by providing incentives will no doubt help also. It will be interesting to see whether Continental continues to flourish under these conditions. Works Cited "Page 2 - Case Study: Continental Airline's Tech Strategy Takes Off - Case Studies." Enterprise Technology News and Opinions on Storage, Security, Business Intelligence and IT Management for CIOs - CIO Insight. N.p., n.d. Web. 24 Aug. 2011. . Serling, Robert J.. Maverick: the story of Robert Six and Continental Airlines. Garden City, N.Y.: Doubleday, 1974. Print. Read More