Scandinavian Airlines: The Green Engine Decision - Case Study Example

Scandinavian Airlines: The Green Engine Decision Summary It is believed that aircraft emissions while in the air lead to global warming. The problems with carbon dioxide emissions in the air are three times higher than other transport systems (Lynes, 3). Because of this, pressure from regulators is creating the need for greener airline systems to reduce the problem. International airlines are subject to many different types of regulations that conflict with one another: federal, local, international and regional laws (Lynes, 4). The business believes that a more profitable business is one that makes stakeholders happy related to green business. To remain a public leader, SAS uses promotion to show their corporate goals for greener business. This is part of public relations on the subject. Even internal managers are being involved in making green business decisions. It is not only carbon dioxide, but congestion, noise and waste systems that are part of the airline impact on the environment. Problem Statement Negative publicity about the airline could cause problems with reputation and profit if good promotion and operations practices are not undertaken as part of the marketing mix. Alternative #1 Green business practices are becoming mainstream attitudes and values. It relates to corporate social responsibility. The business can invest in more advertising on television to show their CSR to the most important markets. SAS can take a lesson from companies like Shell and Marathon that show their activities related to environmentalism – a form of advertising benchmarking. The supermarket ASDA created a 30 minute film regarding waste management and sustainable products to reach Greenpeace and Friends of the Earth organizations (walmartwatch.com, 1). It was called People, Prices, Planet and played in key marketplaces for several weeks. This documentary gave the business more visibility as a leader in environmentalism. Advantages The pro of this option is that it can be played right at the airline or on specialty networks like Discovery to reach markets who care about green lifestyle. By targeting the right networks, consumers who make decisions based on green business will have more brand loyalty. It will also position this company in terms of quality against other competition who might be using pricing or value. In this market structure it is important to have differentiation to remain competitive. Disadvantage The con is that the project represents a very high cost for production and air time if chosen for major networks to reach more audiences. Such costs generally run into well over five million dollars. It will also require hiring talent actors in order to produce, requiring recruitment and more production costs. Alternative #2 Scandinavian Airlines can hire low cost guerilla marketing teams that hand out promotional merchandise. They can be on the street or right at the airport terminals with keychains or bumper stickers showing green efforts. Advantage Street teams are inexpensive methods of marketing. They can also target major urban areas across the world and be interactive with many demographics. A business must understand local culture and beliefs in order to be respected and gain trust and loyalty. Another advantage of guerilla marketing is that it can build brand equity. This is because it will leave a branded image of the company that consumers can be interactive with and keep for a long period of time. Disadvantage The cons of this option are that consumers might see these teams as a nuisance. The last thing that SAS wants to do is cause conflict in trying to build better public relations. It will also involve a lot of training to make sure guerilla teams are properly representing SAS and its promotion focus. Also, guerilla teams do not perform market research that could be used for valuable knowledge about consumers and green business. Alternative #3 The business can purchase more DAC green engines for the rest of its fleet orders. They can also upgrade existing fleets with these engines to provide cleaner emissions. Advantages The DAC engines reduce carbon dioxide, nitrogen, sulphur and carbon monoxide while in flight. With a small amount of price discrimination on certain routes, the costs of these engines can be offset by slightly higher baggage or ticket fees. The green DAC engines, when promoted, will also show the company’s long-term commitment to satisfying regulations and consumer sentiment about corporate responsibility. Disadvantages The largest drawback is the high cost for the DAC engine. The business purchased 55 new planes to be fitted with these engines, but had to gain approval and build a strong business case for the expense. There is also the possibility that green operations is only a trend in the consumer markets and the business would be spending this capital without good reason. If costs are being undertaken only to satisfy regulations, which only exist in some countries, it might only be a niche marketing effort for certain demographics. The best alternative The business should benchmark Shell and Marathon and create new CSR advertising to show their efforts. Even though it is a high cost, the fines that come from regulators for not meeting green business expectations are not small. This option provides the best exposure to many different consumer markets. It can also reach green organizations around the world by promoting it on many different networks. The business wants to set up better discussion with stakeholders regarding their efforts. This can be developed as a one-time advertising effort or be developed as an entire series of CSR promotions globally. Making television advertisements similar to Shell and Marathon is better than the other alternatives. This is because major companies that impact environment have found more brand loyalty and better reputation through these efforts. It is not only consumers that are concerned about CSR, it is specialty organizations and government. To promote more effectively and to reach many different demographics is why television ads would bring more marketing value. By selecting this alternative, SAS can gain more brand equity. SAS operates in an oligopoly, therefore it is important that competitive actions be differentiated. SAS is currently the only airline that would be undertaking this type of corporate social responsibility strategy. Works Cited Lynes, Jennifer. “Scandinavian Airlines: The Green Engine Decision”, Harvard Business School (2009). Walmartwatch.com. “ASDA launches green marketing campaign” (2009). Accessed November 8, 2011 at http://walmartwatch.com/blog/archives/asda_launches_green_marketing_campaign Read More