Airline Game:Report on the Simulation and Review of Strategic Models
Question 1
Key performance indicators that are also referred to as key success factors help organizations in defining and measuring the progress towards the goals of an organization. After an organization has stated its mission and identified all the stakeholders it then needs a way of measuring progress towards the objectives. These measurements are what are referred to as key performance indicators. They are quantifiable measures that are agreed to before hand and those which reflect the critical success factors of a given firm and they vary depending on organizations.
Since the airline company obviously has one of goals as increasing profitability in the industry then the key performance indicators should be those which measure profit and other related monetary measures. Shareholder equity and pre-tax profit will be among them. The company should also concentrate on return on capital, gross profit, and Z-scores as its key performance indicators. Both the return on capital employed and the gross are part of a model for a balanced scorecard for the general objectives that are proposed for most of the organizations as part of their platform on planning (Smith, & Golden, 2004).
Other reasonable elements within the module of fiscal reporting that can be given consideration as key performance indicators are factors like project success rate of any project in the airline company, levels of gearing, that is, debt/equity ratio, free cash flow and debt rates. Other natural additions will be inclusion of budget, time, and specifications to reporting on projects. It was essential to observe the information provided by various market segments for the airline industry. It is through this data or information that the management will calculate demand with numbers that are quantifiable and at breakeven (Sprinkle, et al, 2008).
Question 2
Normally strategies are aimed at matching the resources of a firm to the opportunities coming up in the outer environment. A firm’s capabilities and internal resources instead of the external markets have been increasingly been perceived as a more secure basis for strategy formulation. Competitive advantage as opposed to attractiveness of an industry is also a crucial source of higher success (Porter, 1998).
The successful blend of market and resources strategies can make a company to become an industry leader. The airline company expanded the exposure of consumers making the organization and its services recognizable in the market. Market penetration is very essential in that it considers already existing markets hence reducing the risk amounts; this is because it uses products that are established rather than new ones.
The company embraced market penetration by increasing sales and by cutting costs; it incorporated the available resources. This was done through bookings via reputable websites, the maintenance costs by buying of newer planes. Planes routes were rescheduled to ensure that routes that have more passengers are given priority. 30 seater planes carried more passengers per flight to ensure that resources are utilised to the maximum for more profits. In collaboration with other international airlines the company also sought to have airlines to serve areas that it never served before so as to develop its market. This called for strategic alliances with other companies in the industry (Hitt, Ireland, & Hoskisson, 2012).
The airline company used Porter’s 3 generic strategies. The airline company ensured that it had cost leadership and at the same time ensuring that it was able to command the average price of the industry which would increase its client base. The company sought to be unique (differentiation); the services are provided with an unmatched comfort and prices. The company also has sought to focus on a narrow competitive scope in the industry and then customizing the strategy into serving the clients better than other service providers.
Question 3
It is a common business strategy to grow business by acquiring other companies. Nonetheless, there are various challenges that need to be avoided. If the acquisition is executed poorly it can harm the financial and strategic position of a company. The acquisition can tax the position of the cash flow into a worse state. Normally the acquisition expenses comprise of fees from consultants, lawyers, brokers, financiers and advisors that facilitates the deal; these fees can be enormous and the if the organization finances it by increasing of their debt amounts then the resulting cost of interest form the extra leverage can strain the fiscal capabilities of the firm hence increasing the financial risk if the firm.
The firm management and overall culture will also be affected. Employees along with the skills and knowledge they possess are very valuable in any organization. If the company fails to retain the quality employees then it will lose the value of the expertise. It will as well lose the short and long term focus on the operations of the company. The acquisition acts as a distraction that gains more management attention in place of other events in the business. Additionally the firm’s long term strategies can be impacted negatively if it pursues strategy of diversification. A common threat is when the company loses the sight of its success factors. The implementation will be faced with coordination issues due to cultural differences and different management styles; communication between groups coming together with not be easy (Sprinkle, et al, 2008).
Typically a business owner would want the company to get sales in the short term which will improve the cash and profits. The current market efficiency is also to be improved and then increasing the market share in the extant market. This will result to increased profitability of the company (Porter, 1998).
Question 4
In any organization, the decision makers are often taken away from the personnel who is responsible for implanting the decision. Making strategic decision entails determining and committing to the requirements for its implementation. The requirements of implementation comprises of: the strategic decision in regard to the program of implementation; identifying the person who is accountable for leading the implementation; the financial resources and the associated budget; the negotiated accountabilities for the implementation leaders in relation to the general program of implementation (Alexander, 1985).
In implementation of a strategic decision process the airline was faced with various complex issues. These issues included scheduling factors, loading factors, legislation aspects which entail various costs like cost of maintenance and fuels costs. In implementing decisions concerning these aspects those involved should recognize the need and urgency for some as yet unclear change or action for pursuing though with limited personal stake or identification with the action or change. There should be adequate comprehension of the factors pertaining these strategic processes. The individuals or groups should then accept the personal role in the process of achieving the end state with the accountabilities, risks and the acceptable risks. They should then agree with the other stakeholders in the end state as well as on actions and timing needed to achieve (Atkinson, 2006).
Apart from allocation of budget for activities like staffing, there lacks an opportunity to have the implementation details. Adequate details have to be defined during implementation process; since these details were not provided then it meant that crucial steps of work or interdependencies are disregarded. This possibly resulted to inaccurate estimation of resources whereby some individuals were overworked, some timeline dates were missed. There failed to be commitment amongst the staff to attain the set goals.
Question 5
The strategy used is prescriptive. The prescriptive approach considers development of strategy as a deterministic and systematized process where the organization analysis, its performance along with the external environments results to the formation of a rational, long term plan. The senior management oversees the defining of the final objectives and then the plan is implemented through the organization’s successive layers (Morden, 2007).
The choice of the prescriptive approach is due to the fact that there was analysis of the symptoms of the internal analysis of the company as well as the given environment. Ansoff points out that in environments that are fast-paced and in environments that are competitive and those who use strategic process for strategic planning in most cases end up dominating their industries. Since they have logical and analytical approach it becomes possible for them to devise predictive and pre-emptive strategies which make it possible for them to attain new opportunities without any trouble. The company used a foresight that was inconceivable by introducing low cost flights that allowed it to take advantage of a market that was more cost-conscious.
This approach made it possible to organize complex activities and also exercise a higher level of control of varied business segments. This will result into long-term goals that are well-defined and with clear boundaries for its main business as well as the international sectors. This makes the company to attain consistent profits and growth in varied areas it operates in.
A strategy formation that places greater emphasis on extant capability strengths is taken as a secure basis on which a firm ought to define itself and also optimise its position, specifically when there is swift and unstable change. This is what the company considered in engaging in a prescriptive approach (Morden, 2007).
Question 6
From the simulation I got to learn various things. These included decision making processes, strategic implementation of decision, and key performance indicators in the airline industry. Strategic management in the airline management and what is required to run a company in this industry. From simulation I also got to understand how mergers can be successful and the main problems that can be faced by a company if it has when getting involved in a merger.
In this course I got to appreciate the complexity of the industry; the industry entails a lot and the management ought to be very keen if it is to get success in its daily operations. Failure to be cautious can result to loss or low profitability which may result to closure of the business. In the simulation process I got to have some of the application of real business situations of the financial analysis in performance of the company. The models used in financial planning in the airline industry can fit in the daily life activities. Using the daily life situations in the financial analysis makes the process a bit easier. In addition simulation makes results to improving of reasoning and also brings about better judgements skills. This is brought about by use of events and incidents. When systematic approach is used in the simulation then it is easy to understand how various concepts in business work.
From the entire process I also came to know that not everyone likes this industry with complex factors to operate in this market. Many find it a complicated industry to operate in and shy away from it; they would rather opt for other industries with simpler operational structure and procedures. The organization of the information in this industry is overwhelming; this is to mean that it is disorganised and analyzing it may prove to be hard. To operate effectively in this industry one must have sound knowledge on financial analysis.
References
Alexander, L. (1985), “Successfully Implementing Strategic Decision: Long Range Planning, 18 ( 3), pp. 91-97.
Atkinson, H. (2006), “Strategy Implementation: A Role for the Balanced Card,”
Management Decision, 44 (10), pp. 1-17.
Hitt, A.M., Ireland, R.D. & Hoskisson, E.R. (2012) Strategic management: Concepts and cases: Competitiveness and globalization; USA: South-Western College Pub
Morden, T. (2007) Principles of strategic management, Third Edition London: Ashgate
Porter, E.M (1998) Competitive advantage: Creating and sustaining superior performance
Shapiro, A.C. (2009) Multinational financial management; 9th Edition; Canada: Wiley
Smith, J. & Golden, P. (2004) Management simulations and support, Human Resource Management, New Jersey: Prentice Hall.
Sprinkle, G. et al (2008) Managerial accounting, 1st Edition, Canada: Wiley
Is this your assignment or some part of it?
We can do it for you! Click to Order!
