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10. Airline in 21st Century (Corporate Mission (:red_flag:Linked to LT 5,…
10. Airline in 21st Century
Corporate Mission
(:red_flag:Linked to LT 5, 8)
Short term
Helps to ensure current mgmt decisions are consistent with achieving the corporate mission & objectives
Long term
Facilitates the identification of correct strategies for success & survival
:question: 8. How it impacts on target market demand segment?
:question: 5. How it impacts on implementation of e-Commerce?
:question: 6. How it impacts on CRM?
:question: 7. How it impacts on FFP?
Unclear mission
Leads to poor & often contradictory commercial & operating decisions
Activity
How the gulf airlines are being disrupted?
:star: Common mistakes airlines make in corporate biz strategy
3. Pace of Expansion
:pencil2: Linked to LT 2
Appropriate growth rate to achieve
Hard to ensure success w/o growth
Maturity :arrow_up: = Cost :arrow_up:
No growth = Unable to exploit new market opportunities when available = Exploited by competitors, building to their competitive challenge strength
Decision to capture available slot
Over-ambitious growth
Dependent on borrowed capital
Exposed to exchange & interest rate fluctuations
Falls apart operationally
2. Diversification VS Specialisation
Difficult to balance over-diversifying & over-specialising
Over-diversification
:
Travel-related biz - Car & Hotel rental
Dilution of top mgmt attention
Competition for financial resources
E.g. Seat unoccupied = Hotel vacant = Cars unrented
Over-diversification:
Over-expansion of network
Broad network, too little aircraft
Network served @ low frequency = Opportunities for competitors
High frequency cements control of market
Over-specialisation
Occurs when airlines focus on singular market
E.g. UK carrier build route network concentrated on serving oil-producing regions
Success when oil price is high
Failure when oversupply, low oil prices
1. Objectives
Profit maximisation = Far from True
Airlines set up for various reasons
Achieving satisfactory profit not possible
Objectives imposed from outside, reflect failings of Board
4. Competitive Response
Culture adaptive to change?
Success = manage their competitive strategies
Unsuccess = fail to manage, especially for new, small carriers
Over-response (anti-competitive behaviour) to minor threats via aggressive pricing
New entrants underestimated response of threatened competitors
Time to markets for new products
Proactive vs Reactive
5. Control
Lost sight of Biz
Need worthwhile set of cust & charge profitable prices
Huge spending on building HQ, funding lifestyles of Directors & Snr Mgr
6. Over-optimisation/Fall back position
Expect roller-coaster ride
Dynamic environment: alternating prosperity/recessions/wars/terrorism
Resilient biz plans
Expect demand & yield fluctuations
Manage unfavourable circumstances
Need of a fall-back position (E.g. Portion of aircraft on short-term leases/support service sub-contracted)