Monday 26 September 2011
Candid Airlines Strategic Plan essay
Table of Contents I. Purpose and Current State II. A) The Airline Industry B) Internal Environment III. Strategic Alternatives IV. Best Course of Action V. Goals and Objectives VI. Strategic Plan VII. Policies and Procedures for Implementation VIII. Control and Feedback Plan I. Purpose and Current State In order to change the direction for Candid Airlines they had to put an outline together of the strategy that they wished to execute. First, a new mission and vision were established for Candid Airlines. Mission ‘Candid Airline seeks to provide exceptional customer service and affordable air travel without breaking your bank, with committed to continuous improvement and achieving success as a high-performing organization.’ Vision ‘Provide customer experience in which you arrive at your intended destination safely, comfortably and on time for an affordable price.’ The management team had to set in effect a strategic strategy that followed Candid Airlines’ mission and vision, while enhancing performance and results of the company. In order to change direction of Candid Airlines, it could not be done over night. Deciding to keep what the company had in the first quarter in terms of assets and routes, allowed focus to be paced more so on employee training, satisfaction, and turnover. Employee turnover can be costly and unhappy employees tend to rub off on customers and create a bad image for the company. In addition, Candid Airlines decided to keep their customers happy and live up to their mission statement by offering refreshments, beverages, and magazines free of charge on the plane. In addition they decided to increase the amount of maintenance that was done on the planes so that they are more reliable and clean in order to create a better image of Candid Airlines. Increase in fuel is predicted for the future so they hedged it with fuel contracts in order to avoid unwanted costs. We also sold stock and invested in a CD in order to obtain financing without leveraging the company with unwanted debt. With the success of Candid Airlines due to increase in customer satisfaction and employee satisfaction, maximization of opportunities was considered by expanding on the routes and aircrafts being used in order to maximize revenue. The route invested in was a resort route that will have at least two flights a day. Resort routes can often be limited, so it is a smart investment because it opens options to customers who are flying into a remote resort area. There are currently no competitors in the market for resorts, so it gave the company an edge. In addition to the new route, leasing of larger and new aircrafts was added and two of the older ones were sold. This was done to ensure that we were following our vision and mission of continuous improvement. Also, increases in promotion, social responsibility, and training were increase to exceed industry standards. We did a strategic market comparison and made adjustments in our marketing budges in order to gain more of the market. This was done so that Candid Airlines could remain a high-quality performance organization. Cargo was dropped because it seemed to lack a niche, and ended up costing more than the company was making in this section. One strategy that Candid Airlines decided to embark on was to join several Web consortiums for ticket sales and maintain telephone access. Commissions to the consortiums were 3% of sales along with the possibility that the company will generate some new demand. The consortium, which has the advantage of having several independent sites, would charged 3% to Candid Airlines in commission and gave the customer a 2 to 5% discount. This was the right choice for Candid Airlines because it allowed us to follow our mission and vision statement that provided affordable prices with high quality. In addition it increased sales and allowed Candid Airlines to become an industry leader. *For this section once we are done with all simulations I will input where the company currently stands, and how are strategic decisions got us to where we are today II. The Airline Industry The airline industry has a number of ongoing external threats brought on by both the airline industry and the general environment. The biggest threat externally to Candid Airlines is entrants that are entering the Airline industry. Most new entrants are trying to compete with larger airlines and replicate their low cost strategies. Customers also can affect the success of Candid Airlines because of their high demands for satisfaction and lower prices. In addition suppliers and buyers are external factors that affect the company. It is essential that working relationships built on prompt payment and trust is established. One of the major costs airlines face is fuel. It is increasing, and therefore diminishing profits for the airline industry. Less people are also traveling via planes now days, and considering other alternatives to save money. While there are several threats for the airline industry, there are also a number of opportunities in the areas of growth and profitability. There are several changes to expand to different markets such as the resort or overseas. This would lead to an increase in the number of routes also that are available to customers. Competitors in these areas tend to be decreasing, due to the economy and not be able to afford to stay in business. The Competition The airline industry has fierce competition. The main companies in which Candid Airlines came in contact with were Top Flight Airlines, Majestic Airlines, Blue Sky Airlines, Tranquility Air, and Airscape Express. A lot of these companies struggled to retain a profit each quarter, instead suffered major losses. All of Candid Airlines competitors offer lower compensation packages than Candid Air, which allows for higher turnover rate and lower satisfaction for employees. All fairs, except for Airscape Express were much higher than Candid Airlines. *INSERT CHARTS FROM REPORTS HERE Five Forces There are five main forces according to Porter’s Five Forces Model that impact the success and failure of an industry. The forces are threats of new entrants, bargaining power of suppliers, threat of substitutes, bargaining power of buyers, and competitive rivalry within the industry. These forces play a direct part in the Airline Industry. Like all industries, there is constant competition in the Airline Industry in regards to threats of new entrants. There is not a limit at how many companies can join the industry, which alters the survival rate of airline companies. “The more new airlines that enter the market, the more saturated it becomes for everyone,” (Investopedia, 2011). Getting the companies name recognized and known throughout the industry, leads to the success and survival among competitors. A study was done analyzing the entrants and exits of new competitors in the airline industry. “Both exit and new entry are common events in this sample: new entry occurs in over 20% of the markets, while exit occurs in about 14% of the markets,” (Berry, 1992). That is quite a large turnover and competition rate that all companies in the industry must consider and deal with strategically. There is limited number of suppliers in the airline industry. This means that only certain companies dictate prices and they are usually universal for all companies interested in purchasing aircrafts due to the lack of competition. When looking to purchase an airline ticket, most customers have limited or no say in regards to the type of aircraft they are flying in or the accommodations inside. The choices are usually first class or coach. Even first class is becoming obsolete. This leads to little bargaining power by the buyers. There is an increasing threat of substitutes for the airline industry. There are other means of transportation such as boats, trains, and cars. These are more affordable most of the time than purchasing an airplane ticket. As fuel prices rise, less people tend to purchase tickets to cut back on costs. Airlines however have the advantage of time on their hands. They are the least timely means of transportation. There is extremely high competition in the airline industry. The profits have minimized in the past few decades, which makes it quite fierce. Strategies are being imitated by competitors across airlines to help ensure the survival and success rate of a company. This can be ugly at times. “The extent of competition in the airline industry is appropriately measured at the route level,” (Morrison, 1998). This leads to airliners coming and going to routes whenever they please in order to create the best profit for their company. Internal Environment Based on Candid Airlines’ internal environment it has some distinct strengths. One strength is that it is a needed service. People wish to travel quickly and in a timely manner. Air travel is the fastest way to do so. Another strength is the affordability of Candid Airlines. There discount prices make it an affordable option to fly. In addition Candid Airlines has a highly trained staff that is able to diversify themselves among several job positions, which aids to an increase in customer satisfaction. Customer service is a strength of Candid Airlines. They offer flight attendants, restrooms, free snacks and beverages, and magazines on all their flights included in their discounted rate. As an airline, Candid Airlines has weaknesses in regards to its internal environment. One weakness is seat capacity. All empty seats on flights are considered worthless in terms of revenue. Another weakness is that it is expensive to keep up with the maintenance and ongoing improvements of aircrafts. They are constantly changing and need to be maintained for safety which can be costly. An additional weakness is the uncontrollable factors in the weather that can delay and cancel flights, which can be costly and cause Candid Airlines to react quickly. *For this section I will add a section about financial standings III. Strategic Alternatives Given the standings of Candid Airline’s current financial position, there are several options that the company could wish to peruse strategically. They could maintain their cost advantages, focus on the growth opportunity in regards to markets and routes, form alliances with other companies, and diversify products. Maintain Cost Advantages In order to remain a discount airline, costs need to be closely monitored. Minimal maintenance and fuel hedging will allow for expenses to be kept at a low range. Candid Airlines also offers soda and soft drinks free of charge, along flight attendants. These are major expenses which could be cut back or eliminated in order to reduce costs and help increase income. Labor is also a major cost that must be evaluated, and reductions in pay would help reduce this expense. Growth Opportunity’s in Regards to Markets and Routes Currently Candid Airlines has a minimal amount of flights in various markets. Expansion into other markets such as international or resort, helps increase growth for the company. Entering into markets that are suitable to sustain growth could increase the opportunities available for Candid Airlines. In addition to the growth into new markets, additional routes must be added in order to meet demands of these new market niches. Form Alliances with other Companies It could be to Candid Airlines advantage to form an alliance with other companies. This would be an advantage to the company because it could utilize the markets. This would allow Candid Airlines to work together with other companies to ensure lower prices, larger capacities on flights, and reducing the barriers of competition. Diversify Products Currently Candid Airlines operates under the category of discount airliner. It has the option to diversify itself and change to a normal aircraft, cargo plane, or a luxury. This gives the company the change to utilize all assets and resources in order to generate the largest profit possible. IV. Best Course of Action *This should be a combination of growth in regards to routes and markets, along with maintain cost advantage to live up to our vision and mission V. Goals and Objectives Objectives or Goals Specifies what the firm is striving for, what it wants to achieve. It is highly desirable that targets be established that are quantifiable and measurable. There are ten areas for which objectives should be established: • Market Standing • Productivity • Worker Performance • Physical Facilities • Stockholder Responsibility • Profitability • Innovation • Manager Performance and Development • Public (or Social) Responsibility • Financial Target VI. Strategic Plan I JUST NEED HELP WITH SECTIONS 4-6 THIS IS BASED ON A FICTION AIRLINE THAT WE HAD TO MAKE UP ON A SIMULATIONS PROJECT
