Strategic Management Practices in the Airline Companies in British Aviation Industry

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Area of Study.

Strategic Management in the Airline Industry

Proposed Title.

Strategic Management Practices in the Airline Companies in British Aviation Industry

Introduction.

Strategic management is being considered as one of the effective management tools in strengthening organization performance through effective decision making and systematic strategic formulation and implementation. Strategic management was found to be an effective management tool in transforming a more complex airline sector to a more responsive and innovative administration. This study intends to investigate to what extent strategic management practices are being adopted and practiced by the Airline companies in British Aviation Industry. The airline industry has become a significant and very competitive sector in the global economy as many airline companies entered into the market and trying to become market leader through creating competitive advantages and using effective financial & corporate strategies. Generally organizational success depends on the successful strategic management practices. Since large amount of new entrants operate in the saturated industry, the importance of strategic management practices in the airline industry has grown up rapidly after the deregulation of the industry. The strategic management decisions play significant role and lead the organization towards its goals and objectives. According to Ibarra et al, (1995) the main reasons for business failure are the lack of understanding of the strategic position, poor strategic planning, confusing corporate culture, ineffective organisational structure, poor financial predictions, and lack of confidentiality in the future. Many of these reasons can be successfully managed through the development and implementation of effective strategic management practices.

Aim and Focus of the Study

The aim of my research is to explore the importance of the strategic management practices in the successes of the business in the airline industry. While strategic management is widely practiced by many firms and other profit oriented organizations in UK, its adoption by airline sector particularly in British airline companies at operational level is questionable. Strategic planning in airline companies is still insubstantial and unknown in the sense that there is an absence of documented proof of its practice (Werner Delfmann 2005). This study is undertaken to fill this knowledge gap. It is imperative to study on how strategic management is being adopted by airline companies as a tool of enhancing their performance and achieve competitive advantages. Airline companies in British Aviation industry are chosen as the setting because of their significant role to the UK economy.

Context for the Research

Research Objectives.

The main objective of the study is to examine the adoption and importance of strategic management practices in airline companies in British Aviation industry. In so doing, the study will seek:

I. to investigate the extent to which strategic management is adopted by the airline companies, in line with the strategic management framework that suite its environment;

II. to find out factors that contribute and impede the smooth adoption of strategic management in the airline companies;

III. to see how factors such as management plans, policy and system, organization culture and organization structure have impact in adopting strategic management in the airline companies; and

IV. to identify how effective strategic management practices enable the companies to enjoy competitive advantages.

Research Questions

01. What is the extent of adoption of strategic management practices among the airline companies in terms of;

  • Mission and objective setting;
  • Corporate appraisal and environmental analysis
  • Strategy formulations and choice
  • Implementing strategies
  • Control and feedback mechanism

02. What are the contributing and impeding factors in the airline companies in successfully adopting the strategic management practices;

03. How do factors such as leadership traits, organization culture and organization structure have impact in the degree of adoption strategic management by the airline companies.

Significance of the study.

Finding of the research will increase the level of knowledge and understanding of the subject of strategic management and its application by airline companies. This research will be significant in terms of

1. Identification of the concept and framework of strategic management that takes into account the nature of work and environment of airline companies.

2. Support and enrich theory and model of strategic management in airline companies.

3. Generate greater awareness among airline organizations on the importance of having a proper and practical strategic management framework to support organizational effectiveness;

4. Provide useful knowledge on factors that might have impact and contribute to the successful adoption of strategic management in airline organizations.

The objective of the study is basically three main parts. Firstly is to examine the extent of adoption of strategic management practices in the airline companies and secondly is to see how factors such as leadership traits, organization culture do and organization structure have impact in the adoption of strategic management that suite the environment of airline companies. The third and final part is how strategic management practices help the organisations to achieve competitive advantages. Gathering of data on the extent of strategic management adoption in the airline companies will be based on models of strategic planning by notable strategic management gurus such as Steiner (1979) and Glueck (1982).

Lieterture Review

Strategic management is defined as a systematic process for managing the organization and its future direction in relation to its environment in a way that will assure continuous success as well as secure from surprises (Ansoff 1984, Berry 1995). Strategic management encompasses the process of determining organization’s mission and goals; managing strategy formulation; strategy implementation; and strategy control. Strategic management can be viewed as a series of steps covering the tasks of analysing the opportunities and threats that exist in the external environment; analysing the organization’s strengths and weaknesses within the internal environment, identifying agency stakeholders, establishing organization’s mission and goals, formulating strategies by matching the organization’s strengths and weaknesses with the environment’s opportunities and threats, implementing the strategies and finally engaging in strategy control activities to measure the implementation progress and ensure achievement of the stated goals.

Research Methodology.

Research methodology is the strategy which is significant to determine the way through which research objectives could be accomplished effectively (Goddard & Melville, 2004). According to Collis & Hussey (2009), the research methodology refers the overall approach & perspectives to the research as a whole and is concerned with some issues such as why you collected certain data, what data you collected, where you collect data, how you collect data, and how you analyzed data.

My research intends to explore how strategic management practices contribute to the company’s success with the analysis of top 5 airline companies in the British Aviation industry such as IAG, Lufthansa Group, Air France (KLM), Ryanair, and Easyjet.

It is important to collect the relevant and reliable information about those companies in order to investigate the extent to which strategic management practices of those companies are essential to their ‘success. The data can be collected in two major ways namely primary and secondary data collection methods. The primary data of the top 5 airline companies in British Aviation industry will be collected using well-structured questionnaires, interviews with superior officers, direct observations and other primary data collection methods. My analysis is also concerned with the performance of financial management of those companies, therefore using secondary data is much more meaningful, reliable and easily accessible. The relevant and reliable financial and non-financial data as a result of strategic management practices of those companies will be collected to investigate the importance and contribution of financial strategy in the organizational success. For a better understanding of the companies’ performance, quantitative and qualitative information are also collected.

A perception survey will be conducted to measure variables using structured questionnaire. Questionnaire will be sent to the airline company professionals. Measurement will use Likert Scale. In addition, interviews will also be conducted at selected airline companies to solicit views from selected respondents especially top management in the airline companies. There are number of secondary data collection methods being used to collect the information of selected airline companies such as, previous research conducted relating to the IAG, Lufthansa Group, Air France (KLM), Ryanair, and Easyjet official statistics from their publications, annual reports of both companies, experts opinion reports, magazines, newspapers and journals, massmedia including BBC and CNN, government reports, historical data and information,web information and so on.

The analysis part of my thesis contains two main parts; Quantitative and qualitative analysis. Qualitative analysis will include mission and vision analysis, SOWT analysis, PESTEL analysis, market trends, competitive analysis and so on. In quantitative analysis financial information will be analysed using statistical software such as SPSS, Lotus and excel.Data from 5 major airlines companies in terms of airfare, passenger volume, service quality, passenger-kilometres, traffic level, alliance partners’ profitability and their stock value during the period of 2003-2013 will be collected. Revenue will be divided into 5 categories: schedule passenger service, schedule freight service, mail, non-schedule service and incidental service. Cost will also be divided into 5 categories: labor expense, fuel, flight, ground property and other materials. Revenue and costs will be treated endogenous variables since they are mutually influence each other. For the method of analysis, a panel regression model will be used. Furthermore, all airline companies’ performance will be analysed using Balance Scorecard (BS Model) and benchmarking each other.

References.

Books.

John Ogilvie (2008), Management Accounting Financial Strategy-Charted Institute of Management

Accounting (CIMA).

Ross, Westerfield & Jordan, 2000, Fundamentals of Corporate Finance- ninth edition, Mc

Graw-Hill International Edition.

Baker, H.Kent (Harold Kent) 1994, Survey Research in Corporate Finance; bridging the

gap between theory and practice, Financial Management Association Survey and Synthesis

Series.

Ansoff, H. Igor (1965), Corporate Strategy, Penguin Books.

S.Rajitha Kumar and M.Sarngadharan, 2011, Financial Analysis for Management Decisions,

PHI Learning.

Baker, H.Kent 2005, Understanding Financial Management; a practical guide first edition.

Ethridge, D.E. 2004. Research Methodology in Applied Economics: Organizing,

Planning, and Conducting Economic Research. 2nd edn. USA: Wiley-Blackwell.

Werner Delfmann 2005, Strategic Management in the Aviation Industry; first edition, Ashgate.

Journals.

Vlad Vaiman, Huge Scullion, David Collings (2012), Talent Management Decision

Making, Research Paper Volume 50 Issue; 5, 2012 pp 67-78.

Flynn, N and Talbot, C (1996) “Strategy and Strategists in UK Local Government”, Journal

of Management Development, _ Vol. 15, Issue 2.

P.K. Jain, Surendra & S.Yadav (2005), Financial Management Practices in public sector enterprises;

a study of capital budgeting decisions, research paper, Jounal of Advances in Management

Research, Volume; 2 Issue;1 2005 pp 40-52.

G.H.Lawson (1969), Profit maximization via financial management, Management

Decision, Volume;3 issue 4, 1969 pp.20-38

Electronic Sources.

British Airways (2012), Annual reports and accounts2012 (Online) British Airways Plc,

http://www.iairgroup.com/phoenix.zhtml?c=240949&p=irol-reportsannual (Accessed on 13

May 2014).

IATA (2013), Annual review 2013 (Online), 2013 IATA, Retrieved from

http://www.iata.org/about/Documents/iata-annual-review-2013-en.pdf (Accessed on 13 May

2014)

Ryanair (2013), Final annual reports (Online), 2013, Ryanair, Retrieved from.

http://www.ryanair.com/doc/investor/2013/final_annual_report_2013_130731.pdf (Accessed

on13 May 2014).

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