Airlines

Customer relationship programs are particularly essential when it comes to service based industries. The Airline industry is a service based industry which can greatly benefit from an established web based CRM option. The following report highlights the importance of a CRM system for FirstAir, while depicting the needs of the customers, the management and the cabin and flight deck crew. The report also provides the CRM options that are suitable to FirstAir airline based on the target market and the operation goals of the company.

The CRM options that are listed can help the company better attract customers while retain its current customers for future business. Benefits of Customer Relationship Management The main target of the customer relationship management progr4ams are the customers. Any company wants to attract new customers while retaining its current customers for repurchase through committed loyalty to the brand. Airlines can benefit from the CRM by using data warehousing technology combined with CRM based software.

The combination of the two can sufficiently support online management of resources, queries, capacity planning, load, schedules, customer requests, and the transfer of relevant information about the customer and current trends to all the business units of the company. The management of the company can make use of the information gathered by the CRM to conduct an analysis of the asset utilization, determine the activities and efficiency of the agents, identify the trend for air traffic by category of customers as well as determine the performance indicators of the various agents and customer booking options.

“The airline receives other indirect benefits too. The main one is detailed information about customers’ travel behavior. This information is enriched with other information about customers and their buying behavior, analyzed to identify customer segments and used for targeted direct marketing. A modern airline knows so much about its customers’ travel behavior that it can identify if a customer who regularly flies from A to B stops returning with the airline, can make the customer a bonus points offer for the next time they take a return flight on the same trip and can monitor the customers’ response to the campaign.

” (Hill, 2009) Customer based CRM programs aim to identify the needs of the customers and provide them with specialized features and facilities that can enable them to be stay loyal to the airline. The popular CRM options that are provided to the customers by airlines include online booking for tickets, joint booking for hotels, transport, air travel as well as discounted offering on tourist attractions in the destination in city. Amongst these is also the famous frequent flyer program with which the customers are rewarded for every mile that they travel with the airline.

The frequent flyer program that has been used by the American Airlines since the a980s makes use of a point based system according to which “customers earn points for flights flown, for stays in hotels, for cars hired, for credit card usage and for a wide range of other purchases. They can redeem the points earned for yet more flights, hotel, stays, hire cars and other purchases too. At the last count, an AAdvantage customer had more than 1,500 different ways to earn and spend points. And that is not all.

The more flights customers earn, the more benefits they receive from American Airlines. These benefits include the same VIP ticket booking, check-in, fast-track security and airport lounge access that was described earlier. These benefits are of real value to the frequent flyer and greatly influence their choice of airline. ” (Hill, 2009) One CRM success story is that of the KLM Royal Dutch Airlines. This CRM took a project based approach while aiming at the simultaneous training of the management staff towards customer relationship building initiatives.

“In September 2004, SkyTeam combined the network of nine allied carriers: Aeromexico, Air France, Alitalia, Continental Airlines, CSA Czech Airlines, Delta Air Lines, KLM Royal Dutch Airlines, Korean Air and Northwest Airlines. Passenger benefits included more, easier, and quicker connections, single check-in, consistent assistance at any of the partners’ reservations centres, airport service counters or ticket offices, and access to more business lounges. Also, frequent flier members with any of the Alliance partners could earn and redeem frequent flier program miles over the whole SkyTeam network.

” (Viaene ; Cumps, 2005, p4) Customer Needs The service offerings that are provided by the FirstAir to the customers are of unique nature. FirstAir caters to a highly specialized and elite clientele who need to be at their destinations in a shirt amount of time. Therefore catering to this the company provides shuttling of passengers through supersonic aircrafts with first class service to all its customers along with pick up and drop service from and to their homes/ offices.

The service is highly customized with major emphasis on priority and premium based customer service. As a result the needs of the customers for the FirstAir Airline would include the following. The customers of FirstAir would be traveling for business as well as pleasure, however regardless of their purpose of travel the customers would need their travel/flight preparations to be handled in a quick and efficient manner. This means that the customers would be looking for booking their plane tickets online along with the customization of their flight particulars.

They would require the schedule of the flights to be made available online stating the times the flights takeoff for their respective destinations, the route they take and the type of aircraft for the respective flights. Aside from this the customers would also be requiring a hassle free handling of their travel and procedure for booking. This means that the customers would seek to book for a flights, transport at the destination city and accommodation for stay in the destination city all through one portal.

Being such busy, high profile customers who are paying a premium for their flight and related air travel based services they would require hassle free check in option, pre check in option and multiple options to choose from for in flight dining and drinks. They can require the menu of the respective flights based on seasonal travel to be made available on the portal for their inspection and selection. Similarly they would also require that they be provided entertainment options when traveling alone, or with kids to keep them preoccupied and entertained during the trip.

The premium paying customers of the FirstAir airline would also require the company to provide them with privacy options for their travel especially if they are travelling for business. All requirements of the customers would need to be met in a prompt and efficient manner such that the customers do not have to contact FirstAir representatives or agents again and again for resolving travel issues. They would need all aspects to be taken care of well before takeoff, if possible at their convenience through an online portal.

Management Needs Similar to the customer needs from the CRM, the needs of the Management at the FirstAir n airline would also be significantly different than those of a normal commercial airline company. The management of the FirstAir airline would be interested in identifying how they can best cater to the customer. For this they would be interested in determining a trend from current customers to offer services and products to customers before they can express their desires or identify their lack through complaints.

The management needs from the customer relationship management option would include gathering information on the customers, and making customer profiles. They would need to know how to best market to the customers through mass media, BTL branding and schemes (Jiang, 2003). The management would need to know about the traffic levels top their destinations to identify the trend of the travel of their market. Their needs would also include determining which in flight services are popular amongst the customers and which need to be improved upon for maintaining good relationships with their customers for retention.

Similarly they would also be interested in determining the booking capacity, efficiency and performance of their various customer interaction points. The management needs highlighted above can allow the management to operate the business in a much efficient and effective manner . By gathering in depth data on their current customers, the management would be able to make strategies for attracting new customers while also striving to retain customers using retention and relationship building strategies. Cabin and Flight Deck Crew Needs

The cabin and flight deck crew at the FirstAir airline would be specialized and trained personnel who would be there to provide service to the customers and maintain good atmosphere in the cabin. The facilities that would be provided by the cabin flight crew to the customers would take the form of personal assistance, help service, medical aid, security, comfortable dining and trouble free journey on the supersonic aircrafts. Therefore in order to properly cater to the high end customers of the airline, the needs of the cabin and flight deck crew from the e-CRM to be implemented at the FirstAir Airline Company would include the following.

The cabin and in flight crew at the FirstAir would need access to the flight schedule in terms of any linkages, or possible emergency stops that can take place during the journey. The crew is often bombarded with how long the flight would take till it touches down on the destination city and what time s being kept by the flight and for this purpose the in fight crew needs to have access to real time data about the flight schedule. Similarly the in flight crew would also be needing information about the route being taken for the flight and respective stops that are possible for customer awareness and assistance.

The cabin and flight crew would also need access to the real time customer seating chart, specifically with the names of the customers. This would be helpful in order to assitat the customers to their seats, and to provide them with personalized service during the trtip based on their needs and stated requirements. Similarly the crew will also need to have access to the list of preferred or loyal customers of the airline who are prioritized in terms of service and their demands

Aside form all of this the cabin and flight crew will also need to have access to information pertaining to the customers’ specific requirements for the flights. These requirements include data about the dining preferences of the customers, their privacy preferences, their entertainment choice and their purpose of travel where provided. The respective information about their transit flights and their destination transport where available for the customers will also need to be provided to the crew in order to enable them to better service the customers and provide them assistance on their queries.

CRM Option The CRM option that is proposed for FirstAir is a web based CRM solution which would provide different portals for the customers, the management and the in-flight cabin crew. The reason for the proposition of a web based solution is to provide the customers easy access top the system and to enable the company to reach their customers with an appropriate and a direct interaction point. The web based e-CRM solution would be backed by a data warehouse which would gather historical as well as current data about the customers and their specific travel requirements.

The customers would be able to access the e-CRM system through the internet. They would by provided by a customer portal through which they can enter their personal particulars, their flight destination, number of people travelling and their desired route. The customers would also be provided options to make personalised/ customized entertainment schedules for their trip along with in fight dining selection. In addition to this the customers will be able to select the level of privacy they want during the trip, the purpose of their travel, and the kind of service they would prefer.

Through the identity number the system would determine the priority level of the customer based on the customers commitment and loyalty to the airline for activation of the frequent flyer program and prioritized customer service. In addition to this the e-CRM portal for the customers will also allow them to schedule the pick up and drop timings for their travel dates along with booking of air travel, accommodation and transport for the destination.

This can be conducted through alliance based marketing and joint proposition of services with hotels and private transport service providers. The management would be able to access the same e-CRM solution through a separate assigned portal which they can access through their respective authorized logs. The management would be able to conduct trend analysis and data mining on the information gathered by the CRM on the customers for making reports devising marketing and advertisings strategies.

Aside from this the management would also be able to determine the efficiency of their operations through the recorded bookings. The cabin and flight crew would be able to access their respective portal on the e-CRM on the aircraft which would provide them with the required information for properly providing the customers with their selected services regarding entertainment selections, dining preferences, privacy [preferences, seating selection on the plane, and transit travel. References

Hill, G. , (2009), The Sky’s The Limit With Airline CRM, GCCRM, retrieved May 26, 2009 from http://www. gccrm. com/eng/content_details. jsp? contentid=1950&subjectid=101 S. Viaene, B. Cumps, (2005), CRM Excellence at KLM Royal Dutch Airlines, Communications of the Association for Information Systems, Volume 16 539-558, retrieved May 26, 2009 from http://74. 125. 153. 132/search? q=cache:ZxE0IpXdwLQJ:mis. ucd. ie/courses/KLMCRMcase. pdf+benefits+Airline+CRM&cd=7&hl=en&ct=clnk Jiang, H.

, (2003), Application of e-CRM to the Airline Industry, retrieved May 26, 2009 from http://ausweb. scu. edu. au/aw03/papers/jiang/paper. html Boland, D. , Morrison, D. , O’Neill, S. , The future of CRM in the airline industry: A new paradigm for customer management, IBM Institute for Business Value, retrieved May 26, 2009 from http://74. 125. 153. 132/search? q=cache:tneuNx4HydoJ:www-05. ibm. com/e-business/fi/pdf/highlights/integration/crm_airline. pdf+Airline+CRM&cd=1&hl=en&ct=clnk

Delta Airline started its operation in 1928 as a small airline with the main aim and objective of providing reliable air transport. Currently, the airline’s operations are scattered all over the world as they operate in 52 countries with 0ver 308 destinations across the continent. The American-based airline, Delta Airlines has been the only major airline that flies to Africa as the other airlines even if they fly to Africa, their operations are not vigorous as those of the Delta. The airline offers both domestic and international services buts its popularity is that it offers more domestic flights in major States in the US.

Delta airline has been ranked as one of the best airline in the world and its ranked second after American airline in terms of passenger carrier.

Key Customers

The main customers for Delta Airline are American customers since their major operations are domestic ones although it has the highest international flights most flying to Africa. Most of its customers prefer Delta Airline’s services due to reputation the airline have had in the region and it is currently one the most popular airline in United States after American Airline.

Delta Airline services is also very popular as it offer very competitive flight rates in the region and most of the time, they offer their services at discount rates to attract more and more clients. The main aim and objective of Delta Airline is to ensure that the customers they serve are satisfied and they do not only come back for more services, but also recommend the customer services to their friends and relatives. The customers are usually very happy with Delta Airline due to the fact they study the market and adjust their fare prices accordingly and their services are extremely popular during winter season when they are discounted.

Core Services of Delta Airline

Delta Airline is one of the most competitive airlines in United States. Its main services include offering passenger flights and cargo carrier. Being the most internationally networked airline, Delta Airline is very popular among air transport passengers as they serve most of destination. Currently, the airline has over 300 destinations it serves across the continent and this gives them goodwill among its customers and I wonder they are popular. The airlines keeps on looking ways of satisfying their customers and as keeps on adding more flight in a certain route to ensure their customers’ needs are taken care.

They are also on the look out on other destination where they can increase their destination in order to serve their customer. Value Proposition from the Customers Perspective The airline besides being one of the best airlines in United States and in the world at large since it offers international flights, there is still room for improving their services in order to serve their passengers. Customers usually view a product or services in very many perspective before their make their decision on whether to buy it or not. For this case, Delta Airline services are not exception to this customers’ notion.

One of the most valuable concepts when it comes to Delta Airline’s customers is safety. The world today is under threat of security and safety is the best precaution that can give an assurance that there is enough security. Since the September 11 attack on the World Trade Centre the worse disaster to occur in the American history, airlines operations in terms of security and safety drastically changed. For this case, Delta airlines customers are not exemption in terms of the need to ensure there is a guarantee in terms of safety while someone is flying.

The customers’ value security of the airline to ensure their flights will be secure and there are no chances of hijacking of the aircraft. Although airline business was affected drastically since the September 11 attack, business has returned to normal after the airlines assured their clients that they have enhanced security in their operation thereby guarantee them adequate security while using their flights. Airline’s Competition and Assessing Sustainability of Current Position The worlds today is full of competition in any business and its only businesses that offer competitive products services in the market.

Airline services are not an exemption since there are so many airlines that are in operation in the world today. For this case, each airline has to ensure they integrate their services in order for them to look unique from any other services. Airlines that compete with Delta Airline Company include:

• American Airline
• Continental Airlines
• America West
• United Airways
• Frontier Airlines
• US Airways among other airlines.

For this case, the competition in the airline industry is very stiff and for Delta services to prevail in the market, they have to ensure they are competitive.

Also taking into consideration that the airline operates both domestic and international flights, there are many more competitors in the industry that compete with Delta Airline. Since price happens to be the main determinant when it comes to product’s competitive advantages, Delta Airline ensures that they adjust their fare rates accordingly to go with the current market. For this case, Delta Airline’s fare are adjusted seasonally so that they services can continue prevailing in the market.

They ensure they fare rates are discounted and this has made their services to be very popular in the world. Distribution on the other hand happens to be the other concept that must be considered in marketing of company’s product. Since there is a very stiff competition in the airline industry, airlines have to make sure that their services are scattered all over the world. For this case, the only airline that would survive is the one with as many destinations as possible, in order for their services to be accessible by clients.

Currently, with over 300 destinations in 52 countries, at least Delta Airline services are distributed accordingly and their services are within the reach of many who are likely to use air transport. On the other hand, promotion of products in the market is another crucial concept that needs to be considered in order for organization products to be competitive in the market. No one will know the existence of products in the market unless the customers are made aware of their existence. For this case, an organization has to ensure it is involved in world wide campaigns to ensure their products are made known in the market.

This is the only to popularize a product and to ensure that they have a good position in the market for an organization to achieve it aims and objectives of its operations. For this case, Delta airline is involved with a number of promotion activities to ensure their products are competitive in the market. Some of promotion activities that Delta Airline is involved in are discounted fare rates, advertising, use of coupons and even direct mails. This ensures that their services are made known to people.

For this case, they have a better chance of achieving their goals and objectives are passenger increases due to advertising. As for Delta Airline, their services have continued to be competitive in the market since they keep on advertising them. Delta Airline also ensures that their services are made know to the public through the internet as it has advertised for their services in their main official website and other affiliated websites. The product itself is another important concept when it comes to competitive advantage of a product in the market.

A product of a company has to be integrated so that it stands out among the competitors products. For this case, the product must be very unique for it to attract customer who might be in need of it. When it comes to airline services, Delta Airlines services are very unique and this is the reason the company has continued to experience growth in both US and international market. Since their offer services to passenger, they ensure they give the best customer care services to their client in order to satisfy them.

Customer care services for the airlines starts from the time one buys a ticket to the time one is alight the aircraft. How one is treated during his or her flight matters a lot and this ensure that the customer will come for more services next time, and will also recommend the organization services to their friends and relatives. Business Processes that Support the Delivery of Value to the Customer Various customers of the airline have different needs that attract them to seek their services. For this case, the airline has to ensure it satisfy them in order to attract them in the market.

Enhanced customer care is one of the value that has ensure that Delta Airline will not only maintain their customers but will also attract more customers. They attend to their customers with a lot of courtesy and respect and this ensures them that they are highly regarded making their services to be very popular in the market today. Security check for Delta Airline is another major concern that has ensured customers are satisfied to their fullness. All passengers and languages undergo a thorough security check to ensure they are free from any harmful effect.

This in turn gives a guarantee to the customers as they are at least assuring they will reach their destination safely without any harm. Security threat in the airline industry is one the major concern for passengers and unless there is an assurance that their flights will be save, they will not use their services. Delta Airline has ensured that it gives security check a priority in delivering their services to their passengers and this in turn has made them achieve their organizational goals and objectives.

Delta Airline being one of the best airlines in United States at to the world at large has adequate capital funds that would support any operation the organization might need to be involved. When it comes to acquiring new aircraft, it can acquire them without difficultness and this makes it possible to for it to achieve its goals and objectives. One of the main goals and objectives of the of the airline is to offer the best services in airline industry that is not only competitive in United States alone, but also to the whole world and large.

For this case, they have ensured that they acquire new aircraft models in order to serve them in the best way possible. The acquiring of Boeing 777-200ER, 767-300ER and select 767-400ER has enabled the organization to become very popular in the world market. These are some of the latest aircraft models that no many airlines have acquired, and due to their comfort, the airline attracts more and more passengers who use their services. The company target to acquire Boeing 777-200LR a lie flat sleeper model next year and by 2010, they will have introduced it to all their international flights.

With the most recent aircraft model, the organization has been able to achieve it objective of making profit. The organization has a very strong management team that is always on it toes to ensure that there is no other airline that will offer the best services in the industry. They ensure they alter their fare rates occasional in order to go with the current market, whereby they lower their fare during low seasons and increase them during high seasons. They compare their fare rates with other airlines to ensure theirs are very competitive in the market.

That year also saw the establishment of Area Club of India. Between 1933 and 1934 a number of Indian airlines – Indian Trans-Continental Airways, Madras Air Taxi Services, Indian National Airways etc. , commenced operations The Indian Aircraft Act was promulgated in 1934 and was formulated in 1937 Hindustan Aeronautics Limited (HAL) set up by Wellhead Hierarchal in association with the then Moser Government in 1940 at Bangor. Indian’s first aircraft, he Harrow trainer was rolled out for test flight in July 1941.

In 1945 the Decca Airways was founded – Jointly owned by the Ninja of Hydrated and Tats. Its first flight began in July 1946 In 1946 ‘Air India’ came into being when Data Airlines changed its name to Air Indian In March 1953 the Indian Parliament passed the Air Corporations Act, and Indian Airlines and Air India International were set up after nationalization of the entire airline industry. At this time eight formerly independent domestic airlines: Decca Airways, Airways India, Brat Airways, Himalaya Aviation, Galling Air Lines, Indian National Airways, Air India, Air Services of India were merged. ; 1953 also saw the introduction of Indian’s Civil Helicopter Services. The aviation sector not only brings immense benefits to communities and economies around the globe, but also is a key catalyst of economic growth, social development and tourism. It facilitates connectivity and access to international markets. Air transport currently supports 56. 6 million Jobs and accounts for over SIS$ 2. Trillion of the global gross domestic product (GAP). Air passenger traffic in India is increasing on a tremendous pace. The sub-continent’s airport infrastructure is undergoing modernization with the induction of most advanced facilities. It includes setting up of new Greenfield airports and installation of security, surveillance and air traffic navigation systems. India is currently the 9th largest aviation market handling 121 million domestic and 41 million international passengers.

Today, more than 85 international airlines operate to India and 5 Indian carriers connect over 40 Growth of Indian Airline industry By swarthiness and Tats. Its first flight began in July 1946 In 1946 ‘Air India’ came Into being when Data Airlines changed its name to Alarm Indian In March 1953 the Indian International were set up after nationalization of the entire airline Industry. At this time eight formerly Independent domestic airlines: Decca Airways, Airways India, Brat Airways, Himalaya Aviation, Galling Alarm Lines, Indian National Airways, Introduction of Indian’s Civil Helicopter Services. The aviation sector not only brings Immense benefits to communities and economies round the globe, but also Is a key catalyst of economic growth, social development and tourism. It facilitates connectivity and access to International markets. Alarm the global gross domestic product (GAP). Alarm passenger traffic In India Is Increasing on a tremendous pace. The sub-continent’s airport Infrastructure Is undergoing modernization with the Induction of most advanced faculties. It Includes setting up of new Greenfield airports and Installation of security, surveillance and alarm traffic navigation systems.

The Airline Industry Supply Chain is not a laughing matter. For it involves lots of investments on the part of the Airline Industry. Likewise, it involves lots of the client’s money that could be wasted on substandard services and work. In addition, there are many competitors in the industry that could wipe out a less qualified outfit. The communication styles that exist between various players along the supply chain are open, serious and feedback. First, the communication style that exists between various players along the supply chain is open. Second, the communication style that exists between various players along the supply chain is serious.

Third, the communication style that exists between various players along the supply chain is feedback. While selecting the branding strategy by the officials it is always kept in mind that the direct marketing is at its optimum level and the supply chain and distribution system is always at its most advantageous position. In addition, there is always the potential to innovate new sister brands corresponding the local taste and priorities.

In the globalize era when most of the business organizations are involved in different business activities it has become inevitable for the firms to independently perform all the functions. Most of the companies do not operate their supply chain and rely on other firms to perform the multi-faceted tasks. The successful and efficient combination of the operations of these firms provides the company with the competitive edge in the market. (Cook, DeBree, and Feroleto, 2001). Lummus and Vokurka  (1999) points out towards the need for the managers to understand the performance of all the stake holding firms in the supply chain. According to (Pohlen, 2003), this insight in the performance of each firm will enable the managers to develop measures in order to fulfil the demands of the customers. The main task of the supply chain management is to develop a strategy which can cater the need of the customers and is aligned with the company objectives (Pohlen, 2003).

In this lieu it is important for the mangers to keep on measuring the performance of different parts of supply chain (Deloitte, 1999). It has been a proven fact that the improvement in the company’s performance cannot be undertaken with out improving the performance of its suppliers (Lummus, Vokurka, and Alber, 1999). The planning and information taking activities can be easily performed by the operations managers and senior executives it they have an up to date information regarding the performance of different supply chain firm and stake holders and the resources available to the firm.

Authors (La Londe and Masters 1994; Lambert, Stock, and Ellram 1998; Mentzer et al. 2001) regard a supply chain as a set of firms involved in the upstream and downstream flows of products, services, information, and/or finances.  Mentzer et al. (2001, p. 4) described a supply chain as “a set of three or more organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer.” Thus, the nature of a supply chain is comprehensive so that membership is not limited to a supplier, a manufacturer, and a distributor, but open to any firm that performs various flow-related services (Mentzer et al. 2001).

The notion of production management has been transformed from the manufacturing activities and has expanded to activities as purchasing, warehousing, transportation, and other operations from the procurement of raw materials through various activities until a product in available to the buyer. The notion includes the process of delivering the services to the customers with the products. With the changing time the aspects covered are increasing, the process now also includes R&D, value creation, marketing management, sales activities, accounting and finance.

The operation management model constitutes of inputs and outputs. The list of inputs include,

1. Customer needs
2. Information
3. Technology management
4. Fixed assets of the business
5. Human capital
6. Variable assets related to transformation process.

This would be clarified if the supply chain of textile industry is taken into context. China entered the market timidly; a small nibble at the market but grew into a solid business. China flooded Europe with low cost shirts, pants, underwear, socks and shoes. But how can Chinese manufacturers of low cost product threat high fashion of Europe?

Ultra-cheap clothes, welcomed by consumers and retailers, undermine the fashion manufacturers, already challenged by the arrival of fast-fashion chains such as H&M and Zara, whose products are often made in the Far East. As Li Edelkoort, the respected fashion forecaster, warns, the Chinese whirlwind will flatten the fashion world as we know it and change radically its familiar landscape. “Everyone is putting eggs in one basket – China – and that is potentially devastating for our cultural heritage.” (Menkes, 2005)

While producers are struggling to keep under priced clothes from flooding the European market, designer label brands are waging another battle – against imitations, or “knockoffs”, as they are known in the trade. (Italian designers, 2005) Most of the fakes come from China or other Asian countries with the low labor costs and no concern for social services, welfare and pollution control.

Although the company is currently facing unprecedented challenges but these challenges can be faced only by innovation. These include the abolition of quantitative restrictions (quotas) which took place on 1st January 2005. These challenges are occurring in a period of marked slowdown in economic activity, which has a significant impact on sectors such as textiles and clothing. Furthermore, at the same time the Euro has shown a significant upward trend against the US dollar.

All in all, every segment of textiles and clothing production, from spinning and weaving to garment make-up, has in one way or the other suffered from the impact of the developments of the last few years. (Textiles and clothing sector in the EU-25) The years 2001-2004 have been particularly difficult for the industry. After substantial falls in production and employment in the previous three years, it is estimated that in 2003 production fell by a further 4.4% and employment by 7.1% (EU-25, source: Eurostat). The trade deficit (EU-25) amounted to € 29.4 billion in 2003, the trade in textiles reaching a surplus of € 3.7 billion and the deficit in clothing € 33.1 billion.

European firms need to continue restructuring for the new textile world, where they must focus on quality and innovation, their only competitive advantages over China. For example, Italy’s Biella is spending €2.8m on a marketing campaign to promote “the art of excellence”. The need for innovation and excellence is also the best argument for the survival of Europe’s haute couture. (The sorry state of fashion, 2005)

On International level the EU is the second largest exporter of clothing with China on no.1 position. How has globalization influenced the management of the production chain?

In order to effectively compete in the market the company decided to change the way in which goods were moved from Europe to North America-and at the same time dramatically expanded its distribution capabilities in the United States.

The end result of the company’s efforts is a new 170,000 square-foot distribution center strategically located in Groveport, Ohio, just outside of Columbus. Playing a prominent role in this facility are Hytrol conveyors, which facilitate the flow of merchandise from order receipt to shipping. The conveyorized operation efficiently handles current distribution needs. But just as importantly, it positions the company to support a sharp increase in order throughput anticipated in the very near future (Laura Ashley).

Porter introduced the concept of a value chain to help identify and evaluate potential sources of competitive advantage. A value chain desegregates a firm into its strategically relevant activities in order to understand the behavior of costs and the existing and potential sources of differentiation. Primary activities include the following: inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities cover the following: procurement, technology development, human resource management, and firm infrastructure. Essentially, the firm should analyze each one of the values creating activities mentioned above and create synergies among them. This will be a source of competitive advantage for the firm.

Thus, the following steps should be taken as presented by (Crosby, 1979) in order to improve the supply chain of the company at international level in the context of Airline industry player like RyanAir.

1. Management Commitment: Top management must become convinced of the need for quality and must clearly communicate this to the entire company be written policy, starting that each person is expected to perform according to the requirement or cause the requirement to be officially changed to what the company and the customers really need.
2. Quality improvement team: From a team composed of department heads to oversee improvements in their departments and in the company as a whole.
3. Quality measurement: Establish measurements appropriate to every activity in order to identify areas in need of improvement.
4. Cost of quality: Estimate the costs of quality in order to identify areas where improvements would be profitable.
5. Quality awareness: Raise quality awareness among employees. They non-conformance.
6. Corrective action: Take corrective action as a result of steps 3 and 4.
7. Zero defects planning: From a committee to plan a program appropriate to the company and its culture.
8. Supervisor training: All levels of management must be trained in how to implement their part of the quality improvement program.
9. Zero defects day: Schedule a day to signal to employees that the company has a new standard.
10. Goal setting: Individuals must establish improvement goals for themselves and their groups.
11. Error causes removal: Employees should be encouraged to inform management of any problems that prevent them from performing error free work.
12. Recognition: Give public, non-financial appreciation to those who meet their quality goals or perform outstandingly.
13. Quality councils: Composed of quality professionals and team chairpersons, quality councils should meet regularly to share experiences, problems, and ideas.
14. Does it all over again: Repeat steps 1 to 13 in order to emphasize the never-ending process of quality improvement.

Management must participate in the quality program. A quality council must be established to develop a clear vision, set long-term goals, and direct the program. Quality goals are included in the business plan. An annual quality improvement program is established and involves input from the entire work force. Managers participate on quality improvement teams and also act as coaches to other teams.

Production management refers to all those activities necessary to manufacture products; it may also include purchasing, warehousing, transportation, and other operations. Operations management has a similar meaning, referring to activities necessary to produce and deliver a service as well as a physical product. It is important for the supply chain management to give importance to all of the above activities. Since a low level of performance from any part of supply chain can effect the whole process.The method of operations research, which is the application of scientific methods to the study of alternatives in a problem situation to obtain a quantitative basis for arriving at the best solution, should be used. Other tools of production management such as linear programming inventory planning and control, the just-in time inventory system, and distribution logistics should be used to enhance the productivity of the Company. Other tools and techniques such as time-event inventory system, engineering, work simplification, quality circles, total quality management, and a variety of computer-aided approaches can also be used according to the need.

All these factors can be enumerated with the example of the case of RyanAir. The Ryan brothers publicized in the month of April 1986 that they were about to launch an air service between London and Dublin. This was the first time that their airline was about to face competition and steep rivalry from two fellow airlines that were operating on the same route. These airlines were British Airways and Aer Lingus. This was because this route was a very busy route and thus this Irish airline by the Ryan brothers was subjected to face difficult oppositions. The best possible strategy for countering this competition was based on a movement the supported a low cost economic fare structure. The £98 fare structure was to make money because the initial infrastructure of this airline lacked huge overhead costs generally incurred by an established airline company like British Airways and Aer Lingus. (Kar, 2006, 188)This was more relevant because the move of economic fare structure was based on the strategy that it was indented to make an entry into an already populated route of air service between London and Dublin with established competitors like British Airways and Aer Lingus. Read about Value Chain Analysis Under Armour

This was the best possible method of penetrating the market by luring the customers with extremely low fare. It is obvious that the £98 fare structure would yield profit because it would have two specific advantages along with being about 50% to 90% lower rate than its competitors.(Fletcher, 2003, 56-57) First, with the lower fare system the company was able to attract better amount of customers and thus was able to penetrate the market which is expectedly advantageous for the long run and secondly, with lower cost infrastructure like lower number of employees the company was able to sustain its position and plough back profit margin in a gradual manner. (Rivkin, 1986, 7) The cost advantage of this company can be enumerated as follows (Bhagavan, 2003, 18)

On the other hand it was surely proved to be costly for Aer Lingus and British Airways to retaliate against Ryanair’s entry into the market rather than accommodate it. The Ryanair was to make an entry with a recognizable stamp with their extremely low fare in the market of populated route of air service between London and Dublin surely it would be a challenge for company like British Airways and Aer Lingus to confront it. These present carriers were to respond in a positive approach to counter the advent of this new market entry. It is easily anticipated that the existing company were in a position to allow any substantial price cut to compete with this new entrant in the field of fare structure because Ryanair was already offering a rock bottom fare and price would not be made possible to drop further for British Airways and Aer Lingus. However, the existing companies British Airways and Aer Lingus were to cut prices at least for an eye wash to make a substantial impact on the customers’ impression. Never the less, even this eyewash was to prove costly because for long serving companies like British Airways it is obvious that the cost analysis and the fiscal balance would be demanding for the two companies. With a huge infrastructure and great number of employees it was certainly be difficult for these two companies to cope with the initial coup. (Lamb, 2004, 225-226)

The overall assessment of Ryanair’s launch strategy is clear and absolutely effective. Ryanair’s basic intention was to penetrate an already populated air market. This was risky but profitable if successful. Secondly, Ryanair was trying to access into the existing customer strata of Aer Lingus and British Airways. Thirdly, Ryanair was trying to create a new breed of passengers with its economy price structure. The fourth point enumerates that the new airline company Ryanair was confident enough about sustaining with this price structure. The fifth point could be enumerated as an aggressive market planning as Ryanair was trying to drive away the existing airline companies from having the prime market share of the industry that were already successful in the said field. Next it could be mentioned that Ryanair was looking for a long term market goal and thereby is ready to sacrifice short term profit. It is also true that the company Ryanair was looking for the business traveller section of the market segment which is logical for this specific route. Lastly it could be stated that Ryanair was scheduling itself as a point to point service provider which is logical for a low priced agency.

At this point it would be relevant to mention the response of Aer Lingus and British Airways to counter the advent of Ryanair. Firstly, Aer Lingus and British Airways looked for a price cut to negate the advantage of Ryaair, next, these two companies advertised heavily and banked more on reliability, comfort and class along with incorporating extra services like better food or beverage for example. British Airways installed better security services and a virtually risk free flight for the passengers. British Airways also incorporated better mode of frequency of flight. Alongside these measures British Airways also provided loyalty rewards for the customers.

But it was seen that in spite of huge amount of changes in part of infrastructure from the point of view of these two established airline, especially British Airways, Ryanair was proved to be undaunted by these facts and they became one of the most successful airline services of all time depending on their strategy of economic travel principals. The case study of Ryanair has become an icon for students and teachers alike and continues to be a successful model in the parameters of industrial and management success formulations. This specific case study remains to this day as a ground breaking approach in the world of business studies where a high valued industry like airline business is penetrated mainly on the aspects of low priced and economic fare structures.

Reference

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This case is about easyGroup’s efforts to diversify. The company established itself as a low-cost, no-frills carrier that focused on managing yield in the airline industry. In some ways, easyJet was the Southwest Airlines of Europe: the first successful low-cost carrier. easyGroup has tried to transfer this business model to both the rental car and internet cafi businesses. In this case, it is considering entry into the UK movie theatre industry. This case offers students the opportunity to apply the diversification concepts in chapter 9.

Particularly, it allows students to assess what it means to have a coherent diversification strategy. Secondarily, it also exposes students to Stelios Haji-Ioannou, a successful serial entrepreneur and to an international business context.  Why was easyGroup successful with easyJet? What is your assessment of easyGroup’s diversification strategy? Do you expect easyGroup to be successful in internet cafes and rental cars? Why or why not? Should easyGroup enter the cinema business? If so, how?

Discussion of easyGroup’s history and early diversification efforts . Discussion of the easy formula as a core competence. Should easyGroup go into cinemas? Recommendations and conclusion  easyGroup’s Core Business and Early Diversification Efforts Why was easyJet successful? As Exhibit 8 shows easyJet eliminated some of the costs borne by its more traditional competitors. It eliminated ticketing costs and travel agent commissions.

This was made possible through its use of direct sales in general and the Internet specifically. easyJet also eliminated in-flight catering and the business class crew. Like Southwest, easyJet also focused on high aircraft utilization and aggressive yield management using a formula described on page 3-44. The formula was designed to allow easyJet to charge higher prices for flights that were in greater demand by examining bookings on a day-by-day basis. To what extent did easyInternetCafe extend the easyJet model? easyInternetcafe was based on yield management.

Unlike easyJet, which was based on Southwest Airlines, easyGroup was more of a pioneer in Internet cafes. This is reflected in the evolution of the cafi concept through at least three generations – from the very large stores in the beginning with assistance to the smaller no-frills stores, to something more like a kiosk concept. Cafes differed dramatically from airlines in how flexible and re-deployable the assets are. Thus, while an airline can shift planes away from bad routes and toward goods ones, a cafi is stuck with the location that it has either leased or bought.

There are other differences between the businesses, specifically in how the yield model works. Internet use is a low-cost item compared to an airline ticket. Thus, consumers are likely not as price sensitive. Tourists likely make their consumption decision differently as well. With an airline ticket, there is usually considerable planning and comparison involved in choosing a flight. In contrast, a tourist is likely to drop into the first available or most convenient Internet cafi without searching for the best deal. What do you think of the easyCar concept?

Will it make money for easyGroup? easyCar looks much more like easyJet than easy internet cafe. It uses Internet booking along with the yield management and dynamic pricing. The use of one model of Mercedes was similar to the airlines use of Boeing 737s. easyCar has also done some innovative things designed to both cut costs and increase utilization. Having customers provide their own fuel and clean their own cars were good ways to both cut costs and increase utilization. The alliance with car park owners was another innovative way to keep costs low.

This is considerably larger than some 620 countries, estimated similarly to the same size as Switzerland. (ATAG, 2012). It is orecast that by 2026, the industry will contribute $1 trillion to world GDP (ATAG, 2012). Despite the fact there is over 2000 airlines, each airline generally relies upon either one of the two-airline manufactures. These are Boeing or Airbus, both that are extremely wealthy companies. Boeing & Airbus are extremely competitive against each other and often have court disputes against each other.

The most recent dispute was dated in May 2011, where both companies claimed victory after the World Trade Organisation overturned the ruling in which saw Airbus receive billions of Euros in illegal subsidies. BBC News, 2011). The US complained to the WTO as they thought the $18 billion subsidiary was deemed to ’cause serious prejudice’ to US interests (BBC News, 2011). Growth Rate The Airline Industry woes are expected to continue, with humble profits produced mainly by limiting capacity.

Both Boeing & Airbus already have a backlog of orders due to carriers deferring their orders due to the poor growth in clientele and falling flight prices. (The Economist, 2012). Other factors that are damaging the threat of growth in the Airline industry are the threat of terrorism & increase in fuel prices. Are these factors putting people off? In 2009, there was an immediate decline in air travel by 30% (ehow) after the attack on the twin towers. The drastic decline maybe explained by the fact many feared there could be another terrorist attack in the nearby future.

Rising fuel prices in 2012 are set to have an enormous impact on the industry and set to shrink profit margins awfully tight. The industrys global trade body nas warned that annual profits nave been cut by $500m (Financial Times). Due to the Increase in fuel prices, many airlines have decided to provide the A380 aircraft, hich carries roughly 500 people depending on the configuration. This has helped achieve economies of scale for many companies. Market Share The Airline Industry is incredibly competitive and diverse globally so it is difficult to summarise market share of companies.

However, because of this reason returns are usually lower than expected. This can result in difficultly at times of economic recession. The supply in airline industry is very limited and dominated by Boeing & Airbus, which means there is very little aggressive competition. It is very unlikely to ee a supplier vertically integrated. This means it is highly unlikely that Boeing or Airbus would start offering flight services. The bargaining power of airline companies is surprisingly very low.

Porter’s Five Forces

The year 2011 was another dismal one for US airlines in terms of financial performance. Despite an increase in both passenger numbers and revenues for the year, profits were down in 2010. In total, US airlines earned net profits of about $0. 4 billion, representing a net margin of less than 1%. The dire financial state of the industry was underlined by MAR (the parent of American Airlines) entering Chapter 11 bankruptcy in November 2011. This ended Mar’s distinguished record of being the only one of the major legacy airlines to have avoided bankruptcy. In 2005, Delta, United, Northwest, and US Airways had all FL led for bankruptcy protection. The early months of 2012 offered little hope of improvement. Airline revenues were up by 8. 2% during the first quarter of 2012 compared to the same quarter of 2011. However, as a result of higher costs, net income was down by 73. 6%: net margins had deteriorated from -3. 2% to -5. 2%. The woes of the US airline industry during the 21st century were typically attributed to the triple-whammy of the September 11, 2001, terrorist attacks, the high price of crude oil, and the 2008 financial crash. Certainly, each of these was a powerful force in boosting costs and depressing demand. Yet, the financial problems of the US airline industry predated these events. Even during the generally prosperous sass, the US airline industry had been barely profitable. Outside the US, the state of the airline business was a little better. The DATA, the worldwide association of airlines, showed that the global airline industry had consistently failed to earn returns that covered its cost of capital Porters Five Forces.