STRATEGIC MANAGEMENT Case study presentation Nagarajan & Madhav.pptx

STRATEGIC MANAGEMENT Case study presentation Nagarajan & Madhav.pptx

1. COMPETITIONS IN THE AIRLINES INDUSTRY-CASE STUDY Presenter Nagarajan G Madhav Murhekar Chairperson Dr LRS Mani You are invited to join the seminar on 05.08.2023 at 10.40 A M onwards with below mentioned link Zoom Id : 914 6458 2701 Password : 054906 STRATEGIC MANAGEMENT- EXPGDM401

2. COMPETITIONS IN THE AIRLINES INDUSTRY CASE STUDY The case of the airline industry gives us insight into the performance of airlines in the civil aviation industry. In the case discussed, it is explained that the key competition among the airline industry  involves; less mistakes, more incentives, and superior service. However, the key factors can be copied among this industry and they do not deliver a long-standing advantage in the industry.

3. The case references that Southwest Airlines first started as a low-price airline, it maintains this status in addition to providing other services that could not be copied by its competitors. Additionally, Southwest Airlines have capitalized on its resources and capabilities to deliver more efficient and reduce cost services. In this presentation, we will discuss the airline industry and factors such as; situation analysis, SWOT analysis, strategy formulation, and a strategic alternative implementation.

4. Situation Analysis-General Environment Analysis Currently , the economic depression is influencing every industry, including the airline industry. Besides economic fluctuations, the airline industry has operated well and ever since 1980, it has undergone an average growth rate of five percent and it is anticipated to maintain its growth However , within any industry there are numerous challenges that the airline industry deals with; i.e., high operational costs, regulatory frameworks and demanding customers   However, a PESTLE analysis can be used as a strategic method for airline companies to evaluate all external factors that have an effect on a business.

5. Political Environment Globally, most countries have strict regulations for the aviation industry, due to the dangers associated with flying that can end in deaths, accidents, and permanent damage. Numerous policies have been created to protect passengers that utilize the aviation industry.  Moreover , insecurity and war factors create high-security threats which lead to a reduction in flight activity. Economic Factors The economic factors have a major effect on the aviation industry. Currently , the economic recession has decreased the travel market, hence, the economy and premium traveling dropped. Moreover , the airline industry experienced increasing fuel prices, which, in turn, made it challenging to produce profits. Furthermore , airlines have witnessed increasing labor demands of employees and an increase in potential bankruptcies, which eventually lead to mergers with other major airline companies.

6. Social Factors Due to the changing demands of Customers, airlines are providing extensive services at low fares. Prior years have shown a decrease in business class traveling has caused an enormous loss for the airline companies. Additionally , automation has been a factor affecting the airline industry, Customers are using Skype or participate in conference calls as an alternative to traveling. Technological Changes The significance of technological factors can be comprehended from the substantial use of technology in the global airline industry.  Moreover , airline passengers now have a preference to approach ticketing and check-in services by the use of cell phones or laptop devices instead of waiting in a long line at the airport. In addition, the aviation industry has utilized the social platforms that are available to attract more business activity from Customers. Furthermore , technology has created lighter aircrafts producing speed and fuel economy.

7. Legal Issues Regarding legal issues, there are specific laws developed for air traffic pertaining to the safety and security of passengers. Also , there are several regulations that expect airlines to provide safe travel and the best quality services. Notably , airlines are responsible for airline crashes, any type of damage or disaster associated with its services. Environmental Aspects The factors associated with the environmental aspects of the aviation industry are fuel and climate. Fuel is vital in the airline industry and airlines are expected to invest additional funds into environmentally friendly and fuel effective aircraft. Moreover , climate changes impact the aviation industry, hence, green flying practices in order to protect the environment.

8. Industry analysis The airline industry provides transportation services for Customers which are both convenient and efficient.   The airline companies provide food, drinks, entertainment, flight staff and the fastest and comfortable form of transportation. There are other forms of transportation, but none as fast as airline travel. The airline industry functions not only in the United States but also on a global level. Competitor analysis Porter’s five forces model displays the five forces that shape industry competition; i.e., the threat of new entrants, bargaining power of buyers, the threat of substitutes, bargaining power of suppliers, and competitors.

9. Bargaining power of Buyers The airline industry provides exceptional service. Every airline in the industry has its own marketing strategy and perks that they form to appeal to Customers. Many airlines place an emphasis on cost, in contrast, others concentrate on offering the best features and services. The bargaining power of buyers in the airline industry has an extremely low threat. Bargaining Power of Suppliers The major suppliers in the airline industry are airplane manufacturers. The main manufacturers presently are Boeing and Airbus. Currently , airline business manufacturers are attempting to make their planes more ecofriendly.  However , airline companies are not able to just switch suppliers, hence, many have long term contracts with their suppliers. Moreover , airline companies are the main source of income for the airline manufacturers. As a result, the bargaining power of suppliers contains a low threat.

10. The Threat of New Entrants The threat of new entrant’s aspects contains a low threat to the airline industry. However, there are two aspects that increase the threat level; i.e ., 1 . extremely low switching costs and, 2 . there are no proprietary products or services included.   The time and money involved in opening an airline company avert many people from entering the industry. Threat of Substitutes The airline industry does contain substitutes. Moreover, there is an array of transportation for Customers; i.e., automobile, bus, train, and boat. However , some forms of the listed transportation other than that of a plane can be costly and time-consuming. As a result, airlines are the best selection for Customers when it comes to cost, accessibility, and service. In opposition, there are some Customers who will not fly or because of the cost of a flight choose a different form of transportation if the time frame for arrival to their destination is not a factor. Therefore , the airline industry has a medium substitute risk level.

11. Rivalry/Existing Players The airline industry is at the present time extremely stagnant. Additionally , the amount remains the same, hence, not under or overcapacity in the industry Also , fixed costs are exceptionally high, making an exit from the industry difficult due to long term loan agreements in order to continue in business. Furthermore , the market share appears to be evenly distributed, hence, each business has its own area of the market. Therefore , the rivalry in the airline industry is very high.

12. Internal Analysis In reference to the internal analysis has to do with the strengths and weaknesses of the airline industry. The major areas in which the airline companies should look at are in-flight comfort, baggage handling, the excellence of airline employees, internet use, airport proximity, added services, number of destinations that are accessible, and safety For that reason, carriers practicing the best-cost provider strategy should offer lower rate fares than their direct competitors, and superior service. In order to achieve a successful business strategy, both strategic and financial aspects for the company must be assessed. There are two aspects: The airline companies who present lower fares than their competitors, in addition to higher-quality travel services. These companies tend to attain greater financial and strategic performance over their rival companies. The airline companies who present lower fares than their competitors, in addition to a greater quality air travel services; but, attain a decreased financial and strategic performance over their rival companies are in an indeterminate state.

13. SWOT Analysis A SWOT analysis displays the strengths, weaknesses, opportunities, and threats in any company. However, each airline analyzes its own business and formulate the decisions based on their own positions. Strengths The airline industry provides air travel, publicly known to be a fast and safe way to travel, the employees of extremely trained individuals, and we can segment the market. Weaknesses The airline business has high spoilage rate, an empty seat is lost revenue, Airline travel cost are more expensive , return on investment can fluctuate, a large workforce spread over large geographic areas, needs continued communication and monitoring. Opportunities The opportunities for the airline market growth offer frequent expansion opportunities, technology advances creating cost savings; i.e., fuel-efficient aircraft to more automated processes, increased revenue due to customer service improvements such as onboard Internet access and wi-fi facilities. Threats The threats in the airline industry involve; a global economic downturn adversely affects travel, an increase in fuel prices can disrupt the business model, a sickness or terrorist attack can shut down travel, and government intervention can create costly rules and regulations.

14. Strategy Formulation Strategic alternatives In the past couple of decades, airline industry have been implementing new strategies are more innovative to make their company more profitable. In this case study, several airlines were discussed, one that stands out is Southwest airlines. we would like to expand on their strategic alternatives in this discussion. There are two alternatives in which we would propose: Product Development Southwest Airlines must spread out into supplementary products and services; i.e., car rentals, hotels, and accommodations. Strategically, this would allow them to compete with Hotwire, Priceline, Expedia and, etc. The potential services should coincide with its corporate strategy regarding the best value and lowest prices. Diversification In prior years, Southwest Airlines have been known as a highly competitive, survivor, and best value for the money company. The company can use its brand equity to expand into related diversification; i.e., catering and hospitality business .

15. Alternative evaluation The alternatives are both good ideas, but one is more approachable than the other for Southwest Airlines. The first strategic alternative involving dividing out to the hotel and accommodations and car rental area would not only expand its business but increase revenue for the company. Moreover, the creation of a one-stop shopping arena has never been successful in any airline business, but with the Southwest Airlines’ reputation, they would have a great chance at success. The second alternative for Southwest Airlines’ diversification into the catering and hospitality industry would not be a beneficial diversification strategy, hence, it would be a drastic shift from the company’s core competencies. Alternative The choice involving the strategic alternative plan for Southwest Airlines was plan #1. The growth and diversification in this plan must be limited to those businesses that produce synergy. Moreover, synergy emerges when the performance of several products and services or businesses equals more than the sum of its parts.  Therefore, it relates to the creation of economies of scales, hence, two or more products, services or businesses can reduce their costs by linking operations or manufacturing facilities.

16. Strategic Alternative Implementation Action items The marketing department will oversee creating the promotion and advertising for Southwest Airlines in different locations. The research and development will oversee the research aspects to access customers needs as related to strategic alternatives. Action plan The strategic alternative plan #1 will take place in the United States, Mexico and Canada. The strategic alternative should follow once the research process is finished is completed. The estimated time of implementation is one to three years.

17. Competitions in the Airlines Industry The airline industry has always been a very competitive one. Despite the fact that it has been deregulated for more than 30 years, similarities among airline companies remained. Several airline companies then decided to merge because a lot of them went through bankruptcy proceedings like Continental and United did before their merger. Among these companies that merged, we can cite: U.S. Air and America West; Northwest Airlines and Delta Airlines. United Airlines and Continental likewise merged to create the largest airline in the industry. All of these mergers, however, have not created highly differentiated services since they did not change their internal way of functioning.

18. On the other side, United, which was one of the largest airline merged to create more financial efficiencies and to offer greater travel options to customers since the customers tend to move to the brand with the most perks for them. It is also mentioned in the case that the Delta airline which performed really poorly years before did perform very well in 2014 which is a result of the fact that they purchased 49 percent share of Virgin Atlantic to gain access to the highly valuable New York-London routes and gates in both locations. Definitely, among all of these airlines, the Southwest Airlines has developed some core competencies like: a low price airline, or offering superior services compared to the full-service airlines that make them today one of the best in the airline industry.

19. How important is the environment to the performance of airlines in the airline industry? What does this suggest regarding the industrial organization (I/O) model to explain how firms can earn above-average returns? First of all, we have to know that the environment is very crucial for the airlines industry. Due to regulations, the industry is highly dependent upon external factors such as fuel prices, profitable routes, mobile resources, security standards and guidelines or even government policies to make profit. On the other hand, the environment is also important because it allows the company to formulate and implement a strategy. The company will then be able to come up with a good strategy by knowing its opportunities and threats after analyzing its environment. Basically, the I/O model explains the dominance of the external environment on a firm’s strategic action. From that, it then suggests that the airlines should focus on opportunity which is present in his environment. They should look for areas which maybe attractive in future or are not yet touched by competitors. From this they can get above average returns.

20. The environment is very important to the performance of airlines in the airline industry, it may be the most important factor. Thanks to strict regulations, this industry is highly dependent upon external factors to make profits such as fuel prices, mobile resources, profitable routes, government regulations, and more. Even though partial deregulation took place around 30 years ago, many of the important differential points remained constant., hence giving the same standardized services to all consumers. Airlines can try and differentiate themselves with having less delayed and cancelled flights, and fewer lost bags. The Industrial Organization Model concentrates on opportunities present in the industry. The I/O Model says that to have above average returns, a company needs to study the external environment, choose an attractive area, select strategies, develop assets and skills needed, and lastly, implement the strategy. Therefore, airlines should look for areas that may be attractive in the upcoming future for the chance to implement their strategies, and receive above average returns.

21. 2.Why is there a lot of imitation in the airlines industry, and how does this affect firm performance? There might be a lot of imitations in the airlines industry because companies tend to avoid to stay behind the competition. They may think that customers may like others companies’ proposals and then decide to copy on their strategy instead on working to improve they own internal environment. The fact that there are a lot of imitations affects badly firm’s performance in a sense where since there is no differentiation among services in the industry no of them has a competitive advantage and then cannot get above-average return. The reason there’s a lot of imitation in the airlines industry has to do with regulations because of the nature of air travel. Even though it is the safest way of travel, once a plane that has 300 passengers is in flight., nothing can happen to that plane.

22. Even the slightest mechanical problem can put the fives of the passengers on the life in a matter of seconds. If there aren’t regulations, firms competing to make more profits could unfortunately lead to the overlooking of quality travel as well as safety, Wi-Fi services provided, similar routes, snack and beverage options, arrival and departure times are just a few of the imitations we see today. These imitations affect firm performance by making it difficult to stand out amongst the other firms. Although firms may have difficulty in making more money than their competitors, airlines can achieve regulations arc great because if they weren’t in place and an airline’s plane crashed, that could destroy their reputation completely.

23. 3.How important is the resource-based model to explain how well firms perform in the airlines industry? The resource-based model suggests that to make above-average return, the firm should focus on its competitive advantage. The competitive advantage which is itself the firm’s unique ability, resource or asset which is very hard to imitate by competitors. This model is then really important since airlines work in an environment where it is extremely hard to create or offer unique services. The resource-based model is very important to explain how well firms perform in the airlines industry because the environment makes it very difficult to create new and/or different services.

24. It has an internal perspective to explain how a firm's unique specialization or collection of internal resources and capabilities represent them foundation. It also suggests that in order for a firm to make above-average returns, they should focus on their strengths, or competitive advantages. The competitive advantage is "A superiority gained by an organization when it can provide the same value as its competitors but at a lower price or can charge higher prices by providing greater value through differentiation. Competitive advantage results from matching core competencies to the opportunities such as product quality. buying power. customer-centric Omni channel support. design or innovation capabilities.

25. 4.How can strategic leaders be successful in an industry like the airlines industry? To be successful in the airlines industry, strategic leaders should really focus themselves on innovation, which will allow them to be ahead of competitions. They should decide whether they want to operate as a low cost or one with premium facilities and luxurious travel. Since they cannot control external factors, they should work on improving their internal factors like create better customer care services or investing in robust ticket booking.

26. Strategic leaders can be successful in an industry like the airlines industry with a few guidelines. First, they need to focus on creating value for their consumers. These leas need to make a decision whether they should operate as a low-cost airline or an airline that specializes in high-end travel. Considering the several external factors that are completely out of their control, strategic leaders should focus on internal factors; what they do have control over. Invest in creating and providing better customer service, cancellation guidelines, creating maybe a rewards program to encourage the growth of loyal passengers, and more. Each of those components can help an airline stand out more than one might think

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