Strategic Management at Continental United Airlines - Case Study Example

Strategic Management Student’s name Institution 1 A. Define and explain a SWOT Analysis. B. Include a brief SWOT Analysis of your project company A SWOT analysis is a tool of strategic management which is used in analyzing an organization’s internal and external factors affecting the business at the present and going forward. SWOT is an acronym standing for strengths, weaknesses, opportunities and threats. The strengths and weaknesses are the internal aspects while the opportunities and threats are the external factors (Pearce & Robinson, 2011). Strengths United Airlines has the advantage of a strong operational network since it operates over three thousand flights to over two hundred destinations spread over the international and domestic market. Being a member of the Star Strategic Alliance insulates the airline from litigation with regard to price fixing allegations and antitrust. The strategic alliance also enhances economies of scale through shared operational costs such as frequent flier, reservation and servicing (United Airlines, 2012). United ranks as one of the Airlines with the highest rate of productivity of its employees thus it has enhanced efficiency. Lastly being the fourth largest American carrier with plans for a merger with Continental United Airlines has the advantage of economies of scale. Weaknesses United Airlines has experienced weak financial performance in the last decade which may be an indicator of internal inefficiencies and weak cost controls. This weak performance may scare away potential investors and consequently hamper the company’s growth. United Airlines weak financial performance may be attributed to the company’s over reliance on outsourcing of crucial services. This outsourcing results in spiraling costs which reflect on its financial performance. The majority of United Airlines employees are union employees which results in a high wage bill and losses during strike action. Opportunities The United States airline industry has experienced tremendous growth in recent years and this is expected to continue into the early part of this decade such phenomenal growth offers opportunities for United Airlines to upgrade its network, finances and consolidate its position in the industry. The outlook for the airline industry is further enhanced by better tourism and travel statistics. These statistics indicate that tourism and travel have been on the upward trend and are expected to continue to grow in the coming two years. The improved economic outlook for 2012 is also an opportunity for the airline to improve its industry position as it takes advantage of increased expenditure in business and leisure travel (United Airlines, 2012). Threats United Airlines like any other airline is faced with uncertainty over future oil prices. While the company may hedge on oil prices, the volatility of oil markets as a result of unforeseen circumstances makes oil prices very unpredictable. There is also increasing competition from mergers and other major airlines in the industry such as Delta and Southwest. Going forward the state of the global and domestic economy also remains very uncertain. 2 A. Describe and explain the internal environment using the Value Chain Analysis and B. how it is used to evaluate the strategy of your project company Value Chain Analysis is an auditing tool for strategic management which enables the firm to determine the value of the activities it undertakes and the value they add or deduct to the company. The value Chain Analysis model was developed by Michael Porter who categorized the activities of a firm into primary and support activities. The categorization is intended to find out which activities the organization may undertake with perfect competitive advantage over the competition and activities which it ought to outsource (Pearce & Robinson, 2011). The primary activities are; inbound logistics; operations; outbound logistics; marketing and sales and service. These are supported by firm infrastructure; HR and management; technology development; and procurement. Primary Activities Some of the primary activities at United Airlines are outsourced while others are provided internally. Inbound logistics at United Airlines is one area that needs an overhaul. The freight terminals at most of its stations are outdated and inefficient. The operations function at United Airlines is outsourced to contractors and in some instances through strategic alliance. Strategic alliances offer the best economic efficiency and hence more operations ought to be offered through this channel. Outbound logistics are no different from inbound logistics having obsolete equipment and protocols. This is an area through which United Airlines can afford to offer quality efficiently and hence an overhaul of the system would be enough. Marketing is done through the strategic alliance and through the company website and other mass media. For the moment this strategy is effective since United has experience rising passenger and freight numbers (United Airlines, 2012). Most of the service of the company is done through the strategic star alliance which has proved to be efficient and cost effective and as such it should be maintained. Support Services The support services at United Airlines are also outsourced to some extent and offered internally to some extent. The infrastructure system of United Airlines is in some aspects competitive and in some ineffective. The company has a good work culture and a good organizational structure though the instance of unions is a threat to the organization. The human resource department has done a very successful job of recruiting, motivating, and developing employees which has seen the company have one of the most productive workforces in the airline industry (United Airlines, 2012). The development of technology at United Airlines is one of the areas which has lagged behind and is not competitive enough. The company ought to enter into strategic partnerships with technology media which would help in the sales and marketing department which could be enhanced through new technological innovations. 3. A. Describe and explain Competitive Advantage via Customer Value: Three Circle Analysis. B. Evaluate your project company using the Three Circle Analysis model. An analysis of customer value offered may be done through the three circle analysis. The three circle analysis is a strategic management tool which analyzes value offered by comparing it with what other players in the industry are offering. The analysis looks at competition, unmet needs, and whether collaboration may be achieved. The analysis is intended to take advantage of the distinctive value of the products offered by your organization and how to retain this position; an analysis of areas in which the products or services of the organization may be improved either through partnership or independently; opportunities to make inroads into the competitor’s territory (Pearce & Robinson, 2011). The three circle analysis main component are an analysis of; beneficiary needs; key features of the organization; and the key features of the competitors in the industry. Beneficiary Needs An analysis of airline industry shows that customer have various needs which have been met and some which have not been met by the industry. Clients in the airline industry need hassle free freight services, all services offered at one place for convenience, personalized support, after sales services, convenience in planning and booking, reservations and check in, benefits of frequent flying, and access to travel information. United Airlines Key Service Features United Airlines has mainly been reactive rather than proactive in dealing with customer needs. However, United Airlines response to customer needs is one of the best in the industry albeit with a few exceptions. United Airlines offers substandard freight services since most of its freight terminals are dilapidated. United Airlines offers convenience through its membership in Star Alliance which allows members to enjoy benefits on a wide spectrum as opposed to airlines which are not in the alliance (United Airlines, 2012). The website also offers an array of services which can be accessed easily on the homepage. United Airlines offers personalized customer service both in flight and before flight through twenty four hour customer service lines. It also offers great convenience in online booking ticketing and baggage services. A merger with Continental will offer more convenience by adding more destinations and connecting flights. Other Players Key Service Features While United Airlines may offer relatively superior services, competitors in the industry offer some service features which distinguish them from the main players. Other major players like Delta Airlines and Southwest have better convenience in freight handling and thus they are more competitive than United Airlines. Larger Airlines such as Delta offer better frequent flier benefits since they have large passenger numbers. Other Airlines such as Southwest, offer after flight services such as vacation booking, and transport arrangements which are not offered by United Airlines. Larger Airlines such as Delta have better convenience for client since they fly to more destinations and have more flights per day than United Airlines. 4. A. Describe and explain the Resource-Based View (RBV) and how it is used to B. perform an internal analysis of your project company The Resource Based view is a tool of strategic management which is used to make an analysis of the resources which a company has at its disposal. According to the Resource based view the fundamental aspect of a firm’s competitive advantage lies in its ability to efficiently exploit its resources as compared to competitors (Pearce & Robinson, 2011). Therefore the external environment of a company is not fundamental in determining a company’s competitive advantage. Resources may be either tangible or intangible. Tangible resources are things such as equipment, and employees while intangible resources are such as intellectual and reputation. The company therefore has to use the resources in which it has better competence in order to have competitive advantage. Sustainable competitive advantage has four aspects; valuable resources; rare resources, inimitable resources and non substitutable. Valuable resources give the company an edge over its competitors by their superior quality or contribution. Rare resources enable competitive advantage since they may not be available to competing firms. Inimitable resources cannot be replicated by competing firms and thus give the possessor an edge. Non substitutable resources cannot be replicated by other firms yet they are of particular production value (Pearce & Robinson, 2011). Resource Based View of United Airlines A resource based analysis of United Airlines show that the company has certain resources which would make it competitive in the airline industry. United has a large fleet of planes flying to over two hundred destinations worldwide which make it a recognizable airline thus capable of attracting customers. The workforce at United has the highest productivity of the airline industry which makes it a valuable resource that is hard to replicate since the policies of the company such as wages are not easily matched by other players in the industry. United Airlines has been in business for a relatively longer time than its competitors and as such has built a reputation (United Airlines, 2012). This is a rare and non substitutable resource which competing firms lack access to having been in business for a shorter period. United Airlines merger with continental will make it the largest carrier and will offer it the resource of economics of scale which cannot be replicated by other competing firms. Since the employees are members of unions they are bound to certain standards which make them better employees than the industry average. Reference Pearce, J.A. II & Robinson, R.B. (2011). Strategic management: Formulation, implementation, & control, 12th Edition, Chicago, IL: McGraw-Hill Irwin. United Airlines. (2012). United.com. Retrieved from http://www.united.com/ Read More