Integrated Management Project - Oman Air Company - Case Study Example

Integrated Management Project Name: Integrated Management Project Course: Tutor: Institution: Date: Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 Problem Identification 3 2.1 Organisational Losses 4 2.2 Government Increased Investment 4 2.3 Lack of a Competitive Edge 5 3.0 Problem Analysis 5 3.1 Fewer Flight Routes 5 3.2 Lack of an organizational culture 6 3.3 High Flight Costs 7 4.0 Objectives Identification 7 4.1 Increase Competitiveness 7 4.2 Reduce Government Reliance 8 5.0 Alternatives Evaluation 8 5.1 Privatization 9 5.2 Alliances in the industry 9 5.3 Change of the Pricing Policy 10 6.0 Alternatives Selection and Justification 11 6.1 Alliances Development Process 11 6.2 Diversification Process 13 7.0 Conclusion 13 References 15 1.0 Introduction The Oman government has over the years increased its investment and support of the Oman Air Company, as a State owned and run Air Company. In this case, the government has continuously advanced and allocated public finances to the venture operations. Despite the government’s commitment and support, concerns remain on the management nature and the performance of the airline company. Thus, this makes it unable to compete competitively with peers in the industry as well as stabilize its operations. Consequently, as a consultant in the aviation industry, this report offers a comprehensive of our analysis on the organizational problems and the recommended change processes for future improvements. However, it is imperative to note that the developed consultancy advice is based on the accuracy of the obtained information, a majority of which was presented by the organizational executive management and the records keeping department. For this reason, any cases of misrepresentation and poor strategic recommendations based on faulty and inaccurate information presentation, the consultancy firm bears no legal responsibility and liability. 2.0 Problem Identification The first approach, in developing the required improvement and change recommendations, is a critical evaluation of the organization. In this regard, the consultancy firm developed a SWOT analysis for the organization. A SWOT analysis as Pahl and Richter (2007, p.25) stated, develops a critical evaluation of an organizational internal systems and practices. In this regard, of key interest to the consultancy was an evaluation of the organizational weaknesses and threats at this stage of the problem evaluation as they formed both the internal and external problem challenges. In this regard, the consultancy identified the key problem as consecutive organizational losses, increasing government reliance and lack of a market competitive edge. 2.1 Organisational Losses A key organizational challenge for the Oman Air as developed as listed by the organizational past performances is a continuous trend of making organizational market losses (Sambidge, 2014). In this case, the venture has since the year 2005 experienced a series of losses in the market a value estimated at an average $ 766.9 million (“CAPA”, 2015). Moreover, a critical systems evaluation establishes that although the organization was expected to break even and start earning profits in the year 2014, continues to make losses, a trend projected to advance and continue into the future. For this reason, this is identified as a key organizational challenge worth addressing and change. 2.2 Government Increased Investment An additional review of the organization illustrates that it relies on the government for both technical and financial support. On one hand, reliance on the government technical support is evidenced by the increasing control by the Oman finance and trade minister on the operation and functioning of the airline. On the other hand, the organization is increasingly reliant on the government for financial funding. In this case, statistics indicates that the government has continuously advanced resources to the organization, making it the dependant. As such, this has reduced the overall organizational effectiveness and efficiency. In this regard, the reliance on the government for both technical and financial support has reduced the organizational, operational efficiency and effectiveness as compared to industry peers. 2.3 Lack of a Competitive Edge Finally, the consulting firm’s evaluation of the Oman Air Company establishes that the venture has reduced its market competitiveness as compared to peers in the aviation industry. In this regard, Sarabdeen, El-Rakhawy and Khan (2011, P.44) established that comparing the airline to other airline venture such as the Emirates among others reveals a laxity in the management and leadership approach. As such, a lack of a competitive edge in the market through the lack of a consistent leadership practice and culture has reduced the organizational market competitiveness. Thus, this assessment approach establishes that the lack of an organizational culture is one among the Oman Air Company problems. 3.0 Problem Analysis Based on the above identification of the organizational problems, it is apparent that although the identified challenges are the key development and growth derailing the airline development path, the challenges and problems were only outcomes of other existing organizational systems. As such, this report section offers a critical; evaluation of the probable problem cause factors in the market. In this case, the problem evaluation, analysis establishes that key among the problem causes systems is the organizational flight routes, lack of an organizational culture and high flight costs (Caro, 2005, p.423). This section offers a critical evaluation on each of the listed issues, evaluating their contribution to the organizational failing problem 3.1 Fewer Flight Routes One of the established causative factors for the Oman AIRLINE Company is the organizational flight capacity and schedules. In this regard, an evaluation on the organization flights as compared to peers in the region establishes that a majority of the flights is limited to the Oman region. In this case, the organization has a flight capacity of Videler (2005, p.23) that reduces its ability to venture and acquire increased profits. In addition, the focus on the local market has reduced the organizational opportunity to tap the growing regional and global travel market. For this reason, this has led to a reduced capability by the organization to earn profits and market profits as compared to peers in the region and globally. 3.2 Lack of an organizational culture An additional challenge and causative factor evaluated in the analysis is the lack of a proper organizational culture of the Oman Air Company. In this case, it is imperative to note that an organizational culture influences the perspective and productivity of an organization employees’. Thus, a strong organizational culture increases the overall productivity and the likelihood of the establishment of a market sustainable competitive edge. However, a critical evaluation of the Oman Air Company establishes that the organization has experienced a frequent change in its CEO and executive leadership. In this case, this has influenced the leadership styles that frequently change, changing leading to a changing culture. This challenge can be attributed and based on the political influence and effects on the company, since the acquisition of a majority shares by the government (“Oman Air”, 2014). Therefore, the political influence on the venture leadership has derailed its development of a culture and the subsequent employees’ productivity this leading to the experienced low competitiveness as well as declining profitability prospects in the future. 3.3 High Flight Costs Finally, an analysis of the causes of the discussed organizational problems, establish that the high flight costs have served as a key contributory factor. As such, in this regard, high flight costs have reduced the organizational reputation and consumer base. Consequently, the seating capacity on the organizational flights has reduced to below 50%, thus increasing the production costs against the overall benefits and gains to the venture per flight trip. Thus, this analysis establishes that with its high flight costs, the organization has reduced its flight seat capacity, resulting in reduced profit earnings and the subsequent reliance on the Oman government for financial support. 4.0 Objectives Identification In the view of the current organizational problems and the review on the main causative factors, the consultancy develops two strategic objectives that the current organizational business practices and strategies seek to address and mitigate. In this case, the evaluation of these objectives was based on a review of the targets that the proposed change process would seek to address. Thus, offering a strategic justification and evaluation for each of the proposed organizational strategic change objectives. This analysis was based on the fact that for any organizational change process to be successful, such a change must have clear objectives based on which its success or failure would be evaluated against. 4.1 Increase Competitiveness One of the strategic objectives of the organizational change processes is to create and increase its market competitiveness. In this regard, an organizational competitiveness is based not only in terms of the returns on investment, but also on the brand image and reputation in the market. On one hand, the Oman Air Company’s competitiveness will be based on the annual earnings, on which the organization is expected to break even in the next three years and henceforth earn profits on an increasing annual margin basis (Jasper, 2014). In addition, the organizational competitiveness will be based on the ability to develop and retain a sustainable organizational culture and a brand reputation and market goodwill compared to its industry peers. 4.2 Reduce Government Reliance An additional change process objective for the organization will be a reduction in the government support both technical and financial. In this regard, an objective of the proposed change will be based on the gradual reduction of government reliance up to three years where the venture breaks even. Upon its breaking even, the change process seeks to create autonomy in that the venture will fund and run its operations independently. As such, Chang and Yen (2007, p.349) argued that it is expected that such an autonomy will promote the much-desired organizational efficiency and productivity similar to the aviation industry peers. 5.0 Alternatives Evaluation In pursuance of the established change process objectives and a critical examination of the organizational problem, the consultant firm developed a series of alternative recommendations through which the organization can improve its systems. In this regard, it is imperative to note that the discussed change process alternatives in this report section are based on the organizational problems and the most rational theoretical and practical approaches to resolving them, and not on the organizational ability to execute each of the systems. Therefore, although all the alternatives present a viable approach to addressing the challenge, the organization would lack a current capacity to implement and execute some of the alternatives in the present. 5.1 Privatization One of the main recommendations developed to counter the organizational problems is the concept of privatization. In this regard, a privatization strategy would involve the change and transfer of the organizational management and leadership from a public entity to a privately owned organization. In the development and devising this decision, the consultancy was guided by the existing best practices in the industry. For instance, the British Airways has established and increased its market reputation since its privatization, a move that increased its efficiency and competitiveness. Therefore, the development of a privatization strategy for the venture would benefit it through a wide range of merits. On one hand, the process would reduce the perceived dependence on the government for support and funding, thus promoting the probability for increased organizational operations efficiency. On the other hand, a privatization strategy would finance and allow the venture an increased investment basis through the utilization of the probable increased capital investments by the new owners. As such, this would provide the venture with the desired funding and capital and infrastructural base to compete with other industry peers. 5.2 Alliances in the industry An alternative change process available for the Oman Air Company is the development of industry based alliances. One of the fundamentally identified organizational challenges is the concept of a declining regional competitiveness, thus reducing the organizational profitability possibilities into the future. The application of industry alliances has been a growing component and phenomenon that has increased aviation stakeholders both regional and global influence opportunities. For instance, the Emirates Airline developed an alliance with the Qantas Airline in Australia to share facilities such as airport lodges jointly as well as offer connecting flight services. Consequently, this increased the Qantas presence in the Arab region while increasing Emirates control in the region with increased profitability through increased regional flights (“Qantas”, 2015). Therefore, this analysis establishes that through a forward industry analysis, the venture is likely to encounter an increasing profitability margin over others in the Oman region. In this case, among the proposed industry alliances is the sharing of other support services such as parking spaces as well as the airport lounges. In this case, such a sharing and increasing organizational Oman market dominance would reduce the production and operational costs as well as increase the overall profitability and market competitiveness into the future, serving as an ideal solution to the current organizational problems. 5.3 Change of the Pricing Policy A fundamental organizational challenge and problem is the high flight costs pricing approach, a policy leading to the ultimate decline in the number of flight consumers in the airline, as opposed to the declining flight price policies adopted by industry peers. Therefore, based on these facts, the consultancy firm recommends that the venture develops a low pricing policy in the market (Krouse and Krouse, 2005, p.37). As such, a low pricing policy would allow the venture increase the consumer base through enhanced affordability. Thus, an increasing per flight seat capacity would allow the venture reduce the per flight costs by increasing overall revenues and subsequently enhancing an increasing profit margin into the future. Similarly, the venture has the opportunity for growing and expanding the Oman market base, as per the developed executive plan by increasing affordability and thus promoting an increased traffic flow to the organizational flights, an approach which would support the strategic objective of increasing the venture flights number as stipulated under the objectives approach. Further, the low pricing approach should be based on diversifying from the current organizational flight routes in the region. In this regard, low prices would enable the venture establish a consumer base for new flight destinations, a move imperative in the development of a market competitiveness as well as increasing profitability levels. 6.0 Alternatives Selection and Justification As already argued in the above report section, it is evident that although the various discussed alternatives offer the best approach to dealing with each of the organizational challenge components on lack of profits, dependence on the government and the lack of a market competitiveness, the venture lacks the ability and capacity to implement all the proposed change process at once as each requires capital and time commitments (Pathak, 2010, p.129). Therefore, this report section offers a strategic step by step approach through which the venture can apply the change process. In this case, the consultant concluded that the most relevant and significant change process activities to start with for the venture included alliances and market diversification. 6.1 Alliances Development Process On one hand, a choice of market alliances uses based on the current organizational capital that is evidently low as compared to peers in the industry. As such, as a single entity, the venture would be unable to compete with the established, and large capital based aviation industry stakeholders (Vedder, 2008, p.15). Therefore, one strategic approach to counter this challenge is the development of forward strategic alliances in the market. In this regard, the development of the alliances should be based on an evaluation of the organizational weaknesses and establishing market partners to enable it overcome the challenges. Therefore, this report argues that the management should conduct a strategic market evaluation of the venture through a SWOT analysis approach, based on which the key weakness would be established and prioritized in order of their risk of business collapse and failure. In this case, weaknesses such as lack of enough spaces and lodges across the airports are a key organizational weakness that can be resolved at minimal costs through industry alliances. In this case, in the evaluation of the potential industry alliances, the venture should consider organizations with ample parking space and lodges across the regional airports. In this regard, developing alliances with such ventures for the shared use of facilities in exchange of the organizational strengths such as a local market base consumer base control that the organization enjoys in the Oman aviation industry. In addition, the organization should develop alliances based on an evaluation of the existing market threats and as such seek partners to help overcome them. As Cheng-Jui (2003, p.151) argued, the development of strategic alliances has developed a market platform through which organizations increase their market competitiveness through shared resources approach as well as reducing production costs in the market. However, in the process of identifying the right industry partner, the venture should conduct an industry appraisal to establish and select the most ideal and right partner. 6.2 Diversification Process An additional approach, to acquiring the desired organizational changes, is the development of a diversification approach. In this case, this section offers an insight of the approaches and ways through which the venture can diversify and expand its revenue base in the aviation industry (Batiz-Lazo and Wood, 2003, p.207). On one hand, the diversification process could include increasing the flight number in the Oman based region on a weekly basis. In this case, the flight increment approach should be based on a cost evaluation and consideration approach. As such, instead of having a uniform pricing approach, different flights on the same routes should have different prices as a form of developing different consumer segments in the same region. For instance, the venture should establish relatively high prices for weekend flights and lower prices for weekday flights. Similarly, the venture should develop different flight categories similar to the international flight categories, namely the first class, business class and the economic classes respectively. The adoption of these class categories will facilitate and promote the development of a large market base where the rich pay high flight costs promoting the organizational revenues and the poor acquire affordable flight services, increasing the venture reputation and perception in the industry. 7.0 Conclusion In summary, this consultancy report offers a summary of the Oman Air Company with a view to developing an organizational change program to resolve and counter the current organizational challenges. In this case, in order to counter the challenge of increased loss making, government dependence, and lack of competitiveness the evaluation developed the objectives of increasing flights and changing the organizational culture. As such, the report lists a wide range of alternative recommendations through which to counter the challenges and meet the set objectives including privatization, diversification, and alliances, as well as a price policy change. Consequently, the report recommends the application of a market diversification approach through a discrimination pricing approach as well as the development of forward industry strategic alliances. This report concludes that the application of the proposed change processes will increase the organizational productivity, performance, and management efficiency into the future. References Batiz-Lazo, B. & Wood, D. 2003, "Strategy, competition and diversification in European and Mexican banking", The International Journal of Bank Marketing, vol. 21, no. 4, pp. 202-216. CAPA, 2015, Oman Air reports record passengers, but also record losses, Author. [Online] Available at < http://centreforaviation.com/analysis/oman-air-reports-record-passengers-but-also-record-losses-71974> [Accessed January 23, 2015]. Caro, T. 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