Problem Solution: Classic Airlines

Stakeholder Perspectives/Ethical Dilemmas

Classic Airlines is made up of many stakeholders, each having its own interests, rights and goals. As Classic strives to be a leader within the airline industry, they must look at the conflicting interests of all parties and ensure overall objectives are communicated to all as the company moves forward with the new marketing strategy. The conflict between intermediaries and management would be addressed by providing further incentives and benefits to them. The Classic Rewards Program would allow the travel agents to earn miles for availing additional benefits. By realizing the importance of customer satisfaction in increasing the firm’s value, another ethical dilemma would be resolved, as these customers form the organization’s relationship capital. Classic Airlines would deliver safe and timely journey at reasonable prices, provide high customer satisfaction and concentrate on the efficiency of the services. In order to deliver customer satisfaction, Classic Airlines would develop an effective E-Commerce service for providing convenience and flexibility in booking services and winning new customers. The profit margins would also increase by cutting down the intermediaries in the booking process.

Focus on customer satisfaction and differentiation from other organizations would constitute a major part of Classic’s marketing strategy. It would ensure safe, efficient and low fare air traveling accompanied with excellent customer services. Alternatively, further business would be generated by aggressive marketing on the internet sites. The passengers would be provided with medical services through the in-flight telephones. The ethical dilemma existing between the employees and the owners would be resolved by developing a motivating environment to work in the organization. These ethical dilemmas have been addressed by the management from time to time. However, owing to their broad and diverse nature, it would not be easy for the organization to resolve them at the same time. Simultaneously, the organization realizes that an effective solution for these dilemmas would be essential for making further progress.

Frame the “Right” Problem

Classic Airlines will become the leading world class airline carrier by improving customer services and loyalty, employee morale, and revenues through a customer based marketing strategy.

                Describe the “End-State” Vision

The ultimate goal of Classic Airlines is to become the leading airline carrier in the industry by increasing the customer base through a premier frequent flier program that sets the standard for the entire industry.

Identify the Alternatives and Benchmarking Validation

At present, Classic Airlines needs to focus upon its decreasing market share through strategic alliances with other organizations in the industry (University of Phoenix, 2008); this would enable Classic to provide additional services for satisfying the customers from all the parts of the world. It would be crucial for Classic Airline to form strategic alliances in order to augment its core competencies and gain a competitive advantage. Profitability could also be improved upon through the implementation of modern technology and optimal utilization of existing resources (Drucker, 1974). Strategic alliances would create a network of profitable relationships in the event the organization is unable to create or acquire the resources internally. At the same time, delivering customer satisfaction through additional facilities would provide the organization with another alternative. Similarly, the reservation of tickets in an electronic manner would increase the convenience of customers. In addition, this idea would establish Classic as a distinct organization capable of attracting customers by providing services at competitive prices. In parallel with the idea of Classic Reward Frequent Flier Program, other innovative practices need to be framed to accommodate the changing requirements of the customers. These could be in the form of services such as offering travel without a ticket and a same day freight service. A direct link to this service could be provided to customers though the web-page. Cost-reduction could also be achieved by decreasing the number of reservation operation centers. As a result, the costs associated with the manpower and other areas related to the operation centers would also be reduced (Wiseth, 2004). As the other organizations of this industry are already providing easy online booking services, there is no requirement for these reservation operation centers.

Evaluate the Alternatives

The alternative of entering into a strategic alliance would provide Classic with a competitive advantage and increase the levels of satisfaction in its customers. Moreover, by adding other features to the existing services, the possibility of increasing the number of new customers is also increased. These services would enhance the association of the customers with the organization and could prove to be a useful alternative for the organization for drawing more customers. The reduction in the number of reservation centers could provide the organization with another direct option of reducing the overall cost. In fact, minimizing the expenditures of the operation centers is becoming necessary for Classic. At the same time, Classic also has the option of extending its existing hub similar to other organizations for increasing the number of customers as well as operating efficiency. In fact, the best features of these alternatives have been selected to create a string of subordinate solutions for addressing the various issues. This is done by making a detailed analysis of each alternative and assessing its relative importance the overall for the organization.

Identify and Assess Risks

Every alternative is associated with a certain element of risk. In the case of strategic alliances, due to the combination of two or more organizations, it becomes difficult to integrate their interests (Ramaswamy & Namakumari, 2005).  As these organizations are required to mutually agree on various issues, increased chances of potential differences between them exist. In the case of reducing the number of reservation operation centers, properly managing these centers would be essential; any kind of problems faced in managing these centers could have a negative impact on other services as well. At the same time, customers may face certain difficulties in navigating the process of reservation. Increasing customer satisfaction levels by providing additional services at a reasonable cost even carries some risk. At times, even the additional services might not be able to satisfy the customers as was experienced in the case of Global Air. Here the customers were unhappy with the additional services due to certain unknown reasons.

Upon making a comparative analysis, it is estimated the alternative of entering into a strategic alliance involves a great deal of risk owing to difficulties associated with its implementation. Similarly, the alternative of reducing the reservation centers and delivering additional services involves a lower degree of risk. Accordingly, the operational responsibilities need to be clearly communicated and should be properly documented. Similarly, if the number of reservation centers is decreased, other facilities need to be provided to the customers for availing reservation services. In fact, the risks involved with the various alternatives surely narrow the range of options for Classic Airlines. Moreover, this degree of risk increases significantly for the strategic alliances as it involves an enormous amount of planning and investment. Additionally, locating an appropriate partner and executing the working of a strategic alliance is a big challenge. The potential risks and mitigation techniques associated with these alternatives are determined with the help of industry and competitor analysis and by observing the trends of the organization in previous years.  

Make the Decision

After completing the risk and mitigation assessment, the optimal solution has been determined to be to reduce the operational costs of the organization and properly implement a customer relationship program across all channels. As a consequence of this, profits would increase due to the reduction in costs and the improvement in services would increase the customer satisfaction levels. The introduction of Customer Relationship Programs would help Classic in developing good relations with the customers. At times, CRM is entrusted with the responsibility of managing data about all the customers (Kotler, 2002). By delivering value to the customers, Classic will be able to raise its market share and profits.

Develop and Implement the Solution

The aim of reducing costs would be achieved through hedging and decreasing the commission provided to the travel agents. At the initial level, a plan will be framed for executing the various strategies. Once these plans are framed, the programs including the goals, policies, procedures, and rules for Classic Airlines would be designed. The time schedule and costs would be appropriately determined due to the specialized nature of the program. The basis of the project would be constituted by the ideas produced while analyzing strategic alternatives. These would be then undertaken by Classic Airlines. Consequently, the marketing, financial and technical aspects would be studied with the help of a preliminary project analysis. Accordingly, the schedules and budgets for different components of the strategy would be prepared. The final responsibility for controlling the process would be assigned to the management. Hence, the solution for the organization lies in decreasing the costs, eliminating the commissions and purchasing fuel through new contracts. In addition, these strategies would be required to be executed within a year by the management in an effective manner.

Evaluate the Results

The aim behind undertaking this exercise is to determine the efficiency of the strategy in achieving the overall objective. Accordingly, strategic evaluation and control is defined as the process of determining the effectiveness of a given strategy in achieving the organizational objectives and taking the corrective action whenever required. Classic would surely achieve its profit and growth targets by following alternative solutions for cost reduction and customer satisfaction. Moreover, the customers would be satisfied by conducting a proper and effective research. Hence, the organization has decided to ensure a written agreement between the two partners. It has also decided to provide effective services to the customers at affordable prices.

Conclusion

Classic Airlines is losing the trust of its customers at a very rapid pace and has been unable to resolve the issues, despite taking relevant steps in this direction. The profits of the organization are significantly affected by the constant increase in various costs. As a result, Classic must reduce its operational costs to overcome these issues. At the same time, Classic should develop a Customer Relationship Program to enhance the satisfaction-levels of its customers. It is estimated that the operational expenses would be reduced by 15% and profits would increase by 10% after resolving the existing issues.

References

Drucker, P.F. (1974) Management -Tasks, Responsibilities and Practices (1st ed.). New York:

 Harper & Row. Retrieved July 23, 2008, from Southwest Michigan Library Cooperative.

Kerin, R.A., Hartely, S.W., Berkowitz, E.N., and Rudelius, W. (2006). Marketing

(6th ed.). [University of Phoenix Custom Edition e-text]. NewYork: The

McGraw Hills Companies. Retrieved June 21, 2008, from University of

Phoenix, Resource, MBA570 – Sustainable Customer Relationships

Kolter, P., & Keller, K. L. (2006). Marketing Management (12th ed.). [University of

        Phoenix Custom Edition e-text]. Upper Saddle River, New

 Jersey: Pearson Education Inc. Retrieved July 25, 2008, from University of

Phoenix, Resource, MBA570 – Sustainable Customer Relationships

Kozmi, A. (2005). Business policy and Strategic Management. New Delhi. Retrieved July 25,

        2008.

Ramaswamy, V.S. & Namakumari, S. (2005). Strategic planning: Formulation of corporate

        strategy. New Delhi: Macmillan India Ltd. Retrieved July 24, 2008, from Southwest

        Michigan Library Cooperative.

University of Phoenix. (2008). Scenario Two: Classic Airlines. Retrieved July 8,

            2008, from University of Phoenix, Week Three, rEsource, MBA570 —  

            Sustainable Customer Relationships Course Web site.

Wiseth, K. (2004). Southwest's strategy for success: Consolidate! Retrieved July 25,

        2008, from

        http://www.oracle.com/technology/oramag/oracle/04-sep/o54swest.html

Table 1

Issues and Opportunities Identification

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Table 2

Stakeholder Perspectives and Ethical Dilemmas

Table 3

Analysis of Alternative Solutions

Table 4

Risk Assessment and Mitigation

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Table 5

Pros and Cons of Alternative Solutions

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Table 6

Optimal Solution Implementation Plan

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Table 7

Evaluation of Results