Development of a Strategic Plan for Tourism Based Air Canada - Case Study Example

Development of a Strategic Plan for Tourism Based Air Canada Name Institution Table of Contents Table of Contents 2 Introduction 3 Synopsis of Air Canada 3 Current environment and operation 4 Internal Environment 5 The Micro-Environment 6 The Analysis of Strategic Plan Elements 8 PEST Analysis 10 Stakeholder Review and Analysis 10 Business Outcomes for Air Canada For this Strategic Plan 11 Strategy Assessment 12 Vision 12 Mission Statement 12 Corporate Values 12 Business Objectives 13 Implementation of this Strategic Plan 13 Evaluation and Monitoring 14 References 15 Development of a Strategic Plan for Tourism Based Air Canada Introduction Strategic planning is central to any business operation as it clearly defines the objectives and assesses with great detail both the internal and the external situations of the company’s operations. This is important for the company as regards design of its strategy and its implementation and evaluation of the progress and adjustments made where necessary (Haines, 2004). The exact process of strategic planning includes explanation and re-assessing the missions and objectives of the company, strategy formulation, Environmental scanning, evaluation, strategy implementation, and control (Bradford & Duncan, 2000). Mission statement describes the company’s vision, goals and purpose of the firm. This helps us to come up financial objectives like the sales target and earnings growth. It also helps in guiding the owner of the company and his employees in making critical decisions that affect the direction of the company. This paper is a strategic plan for Air Canada, which is a tourism based business. Haines (2004) also observes that strategic planning is a management tool used by an organization to improve its present status by establishing priorities on what goals and targets are to be met in the future. This brings together all the organization energy towards the projected goals. An effective strategic plan should bring management to a consensus so as to steer head the direction in which the organization is headed (Haines, 2004). Synopsis of Air Canada Air Canada is the largest flag carrier and airline of Canada which was founded in 1936 providing chartered air transport for cargo and transport to over 178 destinations around the world (Milton, 2004). In terms of number of flight destinations, Air Canada is the ninth largest passenger airline in the world and it is a founding member of the Star Alliance formed in 1997 with 28 airline current membership (Milton, 2004). The corporation is headquartered in Montreal, Quebec and has its largest hub is Toronto Pearson International Airport in Mississauga, Ontario (Milton, 2004). The Airline has a fleet of Boeing 777 wide body jetliners, Airbus A330, Boeing 767, Airbus A320 family aircraft and Embraer E170/E190 family aircraft (Milton, 2004). The Airline has different operating divisions including Air Canada Jetz and Air Canada Cargo and its subsidiaries include Air Canada Vacations that provides vacation packages to over 90 destinations (Milton, 2004). On average, the airline together with its partners operates 1530 scheduled flights every day (Milton, 2004). Air Canada has one of the best marketing programs that have seen it maintain it position in the value chain. The corporation is headquartered centrally in the capital city and has its key operational offices in key cities around the country. The corporation also has an elaborate marketing program that has been responsible for its relatively good performance and business expansion in its niche market. Air Canada’s marketing program has been designed in such a way that it focuses on advertising the company’s services and products to its market clientele in order to increase its clientele. In this regard, Air Canada runs different commercial advertisement both on local and international media channels to increase its market share (Milton, 2004). Its extensive involvement in activities in the society has won the company a good reputation that has transferred into a wide customer base. Current environment and operation It is very important to consider the working environment when determining the position of a business in developing the strategic plan which is critical in the development of this strategic plan for Air Canada Corporation (Milton, 2004). As stated earlier, the company is centrally positioned in the country’s capital. This position assures the company an easy access to vital business information that is vital for its operations. Different factors affect the business environment of Air Canada and these can be categorized in four different categories: internal factors, external factors, micro environment factors, and macro environment factors. Internal Environment According to Erica (2012), internal environment factors constitute factors affecting a business touching on resources and facilities that are available to the business. From the SWOT analysis of this company, its marketing operations are seen with its over 10000 personnel stationed at its headquarters and others situated in its different outlets around the world. These personnel are well qualified with relevant skills that enable them to conduct their roles and this has been associated with the fact that the hiring approach that the company used ensured only the best qualified personnel got on board of the staff (Milton, 2004). Staff wages is another attribute of Air Canada regarding its internal environment that influences the way the company handles its business affairs. This is an important attribute since employees are very sensitive in their needs and therefore require a lot of care and consideration as far as their wages are concerned (Bradford & Duncan, 2000). When the issue of wages is not well addressed by organizations, personnel are de-motivated and may engage in strikes as a way of wanting to agitate for their interests as regards wages. This then requires that a company balances the manner in which it addresses these concerns as it may not simply pay high wages at all times as this would adversely affect the profit margins and economics of the business. At Air Canada, study shows that the company has done well in balancing this need for wages for the employees at the same time ensuring that what is paid is not exorbitantly affecting business economics and profitability (Milton, 2004). The Micro-Environment This section of the paper deals with factors of the business that affects the business from an external point of view. In this regard customers, agents, distributors and suppliers form this base of factors that are covered under the micro environment. The company has a large client base which has greatly increased its market rating and Milton (2004) argues that this increase is associated with the strong referral systems that help the company reach even more clients. In order for referrals to work, the services provided must be very effective and of high quality so that those that experience are satisfied to the level that they are happy enough to share with their contacts encouraging them to use the services (McArthur, 2013). In addition to this, Air Canada has a robust CSR program where it supports different activities within the society aimed at endearing itself closer to the community in which it thrives. Some of these activities include sponsoring various educational programs, recreational activities, sponsoring sporting events and participating in different rehabilitation programs around the world. These extensive CSR initiatives have helped gain Air Canada a good reputation within the society that it operates in (McArthur, 2013). The business trends and financial performance of Air Canada is an important attribute that is important for this strategic plan. The following breakdown helps paint the picture of the operations of Air Canada performance in the market: Financial Difficulties – There has been a financial challenge with the company from the late 2000s caused by the global recession and this development has led to speculation that the corporation may file another bankruptcy less than ten years after they did so on 30 September 2004 (Air Canada, 2013). The corporation had pension issues in 2007 stating that “their $2.85 billion pension shortfall was a liquidity risk in its first quarter report and that it required new financing and pension relief to conserve cash for 2010 operations” (Milton, 2004, p. 12). Air Canada was required to pay $650 million into the pension fund but this did not materialize as it suffered a 2009 first quarter loss of $400 million thereby requesting for a moratorium on its pension payments (Air Canada, 2013). In a similar development, in 2013 Air Canada’s use of systematic overbooking which sold the same seat to more than one person, was exposed and highly criticized as it caused a lot of ticket-holding for passengers and many were stranded (Milton, 2004; Air Canada, 2013). This persuaded the Canadian government to consider adopting a legislation to protect airline passengers (Milton, 2004). Trends in Air Canada Business – a review of the financial books for Air Canada s in the recent past the company has been struggling with considerable losses. For instance, in 2007 the company made considerable losses and only registered progressive profits in 2012 when it realized some form of profitability after taxation (Air Canada, 2013). This overview is presented in table 1 below for a period of seven years. Table 1: Air Canada Key Business Trends for the past 7 Years 2007 2008 2009 2010 2011 2012 2013 Turnover (C$m) 10,646 11,082 9,739 10,786 11,612 12,114 12,382 Net Profits/Losses after tax (C$m) 429 −1,025 −24 −24 −249 −136 10 Number of employees (average FTE) 23,900 24,200 22,900 23,200 23,700 24,000 24,500 Number of passengers (m) 33+ 33+ 30+ 32+ 33.9 34.9 35.8 Passenger load factor (%) 80.6 81.4 80.7 81.7 81.6 82.7 82.8 Number of aircraft (at year end) 340 333 332 328 331 351 352 Source: (Air Canada, 2013). From the above table, the following graph can be deduced: The Analysis of Strategic Plan Elements According to Erica (2012), the two most important strategic analysis elements for a business are SWOT analysis and PEST analysis which are analyzed hereinafter. SWOT Analysis This analysis seeks to understand the operations of the business based on the internal attribute of business affecting it. The model does this by looking at the strengths, weaknesses, opportunities, and threats that the business currently experiences. Strengths – Air Canada has a number of strengths that can be seen from its good client reception that has enabled it to enjoy a wide approval rating from its clients in the market (Sullivan & Steven, 2003). In addition to this, Air Canada has innovative ways of addressing the challenges that come within its business and this equally makes it very competitive and highly appreciated by its clients. There is a high client satisfaction and the local personnel that are involved in the company’s business are also very interested in the things that the organization engages in. This has had the effect that the company has won the trust of both its personnel as well as the clients that are associated with it. This level of trust according to Milton (2004), is the greatest asset that any business can ever hope for. Weaknesses – Lack of adequate knowledge in use of some modern office equipment and equipment coupled with financial struggles are the two main challenges that face Air Canada. As an airline operator, the use of adequate technology is imperative and given the fact that Air Canada has struggled with this attribute over time. In addition to this, the corporation has also struggled with maintaining a profitable stream of business twice filing for bankruptcy to shield itself from being liquidated (Air Canada, 2013). Opportunities – Air Canada has a number of opportunities in its immediate market as well as its larger external environment within the corporate air transport industry. One of the opportunities comes from the chances for partnerships that the company could engage in with other airlines to ensure that it increases its number of flight routes and fleet capacity. In addition to this, Air Canada could also partner with different banks to offer financing opportunities for its clients that may want to use their banks to finance their travel plans. Threats – Air Canada from the foregoing discussion has different threats that continue emerging in its business operations. The most unforgiving threat is that from its competitors that run similar services and products in the industry and in the geographical region in which the airline operates. Even though the company has a high client approval ratings in the market, there is a lot of intense competition that constantly threatens the company with possible overrun and this constantly threatens its operation effectiveness and the appropriate strategies that it requires to implement in order to remain afloat in the business. In addition to this, Air Canada’s operations is threatened by similar products and services that are already existent in the market and therefore it is supposed to find a way to make its services and products unique and desired by the clients in the market. PEST Analysis A PEST analysis is another important part of the strategic planning just as much as is SWOT analysis. A PEST analysis of Air Canada shows how the company is affected by the political, environmental, social and technological. There are a number of factors affecting the company. However, the country enjoys a good political stability with a few cases of instability rarely reported. The main political influence to the corporation is the government involvement through taxation. This has forced the airline to increase its price rates to remain competitive which does not always go down well with its clients. In addition to this, the government also controls various positions on market ethics which does not give the corporation the liberty to and flexibility to implement its own controls (McArthur, 2004). However, the company seems to be less affected by this as it is among the most influential companies in the country. There are a number of economic factors that affect the operations of the corporation. Considering the state of a trading economy in the short and long-terms, the corporation enjoys good interest rates due to the good economy (McArthur, 2004). Stakeholder Review and Analysis Stakeholder analysis is an important attribute of business development as it provides a good understanding of the many different administrative and operational needs that a business has. For Air Canada, this is an important attribute in understanding the most appropriate strategic plan that could be used to ensure effective performance in the market. According to Erica (2012), stakeholder analysis provides a way of indentifying the different groups and individuals that are involved in the management of an organization and its effective operations. The information obtained is important then in assessing the way stakeholders’ interests are protected and taken care of in an organization from time to time (Erica, 2012). For this strategic plan, the following are the main guiding objectives: 1. The plan seeks to determine the role that Air Canada stakeholders take in running the company as regards its impact on their clients 2. The plan seeks to establish the interests that Air Canada’s stakeholders have and how these can be addressed in the management of the business 3. The plan seeks to establish the single-most important corporate obligation that is imperative for stakeholders to have in the running of Air Canada as a business entity Business Outcomes for Air Canada For this Strategic Plan Statistics show that the Airline industry in the US for instance, is a very robust and competitive industry that requires high consistency and effectiveness in the way business is done. It is an industry that largely relies on state-of-the-art technology and effective service delivery and therefore any organization that would like to thrive in this business should at all times ensure that these two attributes are adhered to, to the latter (Erica, 2012). In this regard, these attributes are important for Air Canada as they provide both opportunities to grow its business as well as challenges that ought to be addressed by the company. From a competitor and customer analysis point of view, it can be appreciated that Air Canada has a very high competition from other companies in the industry from different corporations in the region. Some of these competitors include Air Express Ontario, Air Creebec, Air Canada Express, Air Labrador, and Air Georgian among others (McArthur, 2004). Statistics show that these competitors at the moment still enjoy a minimal market share in comparison to Air Canada but this should not be considered as a point of relaxation for Air Canada as the smaller companies have a lot chance to grow their dominance in the market (McArthur, 2004). This is why it is imperative for the management of Air Canada to critically look at the events happening within the market with the view of strengthening its grip on the industry and this can be achieved by focusing on stakeholders’ interests particularly as regards marketing and profitability for the business are met at all times (McArthur, 2013). In the same way, reviewing the clients’ market perception of Air Canada provides insights that are important for the planning and strategizing for the business. It has been established elsewhere in this plan that Air Canada enjoys a large client approval in the market which is a very promising business end result for it. With satisfied clients, the business can sit pretty and expect greater clientele growth and hence profitability in its operations (McArthur, 2013). In fact, according to McArthur (2013), the Canadian airline industry has been experiencing a big boast with the growth of the Canadian tourism market and it has been Air Canada that has made the most with this boom with increased travels to meet the growing demand in the tourism industry. Strategy Assessment Vision “Building loyalty through passion and innovation” (Milton, 2004, p. 13). Mission Statement Connecting Canada and the World Corporate Values The most foundational attribute of Air Canada’s values that has made it very significant in the industry has been the fact that the company has customized its operations to advocate specifically for the needs of its stakeholders and clients. This can be envisioned from its extensive Corporate Social Responsibility and a robust working relationship that is has with its clients. In order to effectively address these needs for both its clients and stakeholders, Air Canada has instituted basic values and aspirations that are captured in the following attributes for this plan: Business Objectives In order address the pressing needs that the company has, this strategic plan suggests that the business focuses on expanding the business definitively in the process ensuring that it offers the stakeholders returns that are acceptable. In addition to this, the company should invest appropriately in innovative systems for its market segment in order to optimize its operations even more. Implementation of this Strategic Plan In order for effective implementation of this strategy, it is recommended that there by an effective plan for action that is alive to the following steps: The Action Plan for Implementation – this action for implementation should constitute specific actionable points that are specifically assigned to specific persons within the organization to ensure accountability and responsibility (Erica, 2012). Organization culture and structure – this is important as it epitomizes the manner in which the organization operates its activities. It also provides a clear flow of command when implementation starts and therefore ensures that there is no duplication of roles from time to time. Resources and Skills Available – implementation of strategies require a lot of care and are usually very demanding on resources and skills. For Air Canada, there has to be a well outlined skills base and resources that are set aside to ensure that this strategic plan is implemented. Where there is need for acquisition of new tools for management and new equipment, the company should be able to do so in order to ensure that everything is well implemented for the greater benefits as envisioned in this plan. Appropriate Leadership – there has to be appropriate leadership that is able to lead the company through with the implementation of this plan. Evaluation and Monitoring An appropriate strategic plan should always create capacity for evaluation and monitoring. This means that the implementation process should be staged in a manner that ensures that there is appropriate capacity to show the progress and document the observations that are being made in the process (Erica, 2012). The evaluation should be able to show the areas of improvements that has been observed and the areas that still require improvement and better approach to reach the desired goals. In the end, proper evaluation should be able to measure the success of the plan as a way of developing a stronger culture from the plan implementation strategy (Erica, 2012). References Air Canada. (2013). About Air Canada. Retrieved from http://www.aircanada.com/en/about/index.html Bradford, T. & Duncan, J. (2000). Simplified Strategic Planning. New York: Chandler House. Burkhart, P. J. & Reuss, S. (2010). Successful Strategic Planning: A Guide for Nonprofit Agencies and Organizations. Newbury Park: Sage Publications. Erica O. (2012). Strategic Planning Kit for Dummies. 2nd Edition. New York: John Wiley & Sons, Inc. Haines, S. (2004). ABCs of strategic Management: An Executive Briefing and Plan-to-Plan Day on Strategic Management in the 21st Century. New York: Sage Publishers. McArthur, K. (2004). Air monopoly: how Robert Milton's Air Canada won and lost control of Canada's skies. New York: M & S Press. Milton, R. (2004). Straight from the Top: The Truth About Air Canada. New York: Greystone Books. Sullivan, A. & Steven, M. (2003). Economics: Principles in Action, New York: Pearson Prentice Hall. Read More