The Strategy Process
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Strategic planning is a crucial process for any organization because it helps in building partnerships as well as articulating the vision that are necessary for different departments or sectors within an organization to work together on common goals. The key is to establish the organization’s need for services and geospatial data that are shared by various stakeholders. Experts consent that effective planning is vital for driving forward collaborative programs and for getting the required support for investments in an organization’s statewide spatial data structures. It is, therefore, imperative for all organizations in all industries to devise strategic plans so that they can achieve both their short and long-term objectives and goals. Using Atlas Air Worldwide Holdings (AAWW) as the case study, this paper sets out a strategic plan for the company, which aims at identifying ways through which AAWW can reduce costs. This will result in increased revenues and profitability. This paper also analyses internal and external status of the company by reviewing its strengths, weaknesses, threats, and opportunities. It also presents a series of statements that relate to AAWW’s mission, vision, and values and sets out the company’s strategies and goals.
Company Background and Current Situation
Founded in 1992 by Michael Chowdry Atlas Worldwide Holding is a US multinational company that offers aircraft outsourcing and operating services to its customers. This multinational company provides the aforementioned services customers in Europe, South and North America, Africa, Asia, the Middle East, and Australia. AAWW is the parent company of Atlas Air and Titan Aviation and Leasing Company. Additionally, the company is a major shareholder in Polar Cargo Worldwide. Apart from being a parent company and a major shareholder of the above companies, AAWW holds over 49% shares in Supply Systems Limited. This indicates that the company is not only a leading player in the airline industry, but is also a highly diversified company in the industry.
In order to deliver its outsourced aviation and aircraft operating services effectively, AAWW has divided its service delivery mechanism into four segments: commercial chatter, dry leasing, ACMI, and AMC chatter. These segments illustrate the company’s diversity because it provides numerous services in various fields such as maintenance services, aircraft operating solution services, insurance services, and crew and maintenance services. Additionally, AAWW provides full planeload cargo and passenger chatter services both domestically and internationally. AAWW is a leading supplier of freighter aircrafts to major airline companies globally. The company has employed over 1500 people. In the financial year that ended in December 2010 (FY2010) the company recorded revenues of $1,337.8 million, which is a 26 percent increase from FY2009 (Atlas Air Worldwide Holdings, 2008). Moreover, the company recorded a profit of $224.3 in 2010. This translates to a 50.5 percent increase from 2009. The company’s net profit in 2010 was $141.8 million, which represents 82.3 percent increase from the previous year.
Vision, Mission, and Value Statement
Mission, , and values are important elements of AAWW strategic planning. As required, they have been approved by AAWW’s board of directors and communicated to employees, board members, and other stakeholders. The vision, mission, and value statement define what AAWW wants to accomplish through its operations. These statements are often expressed as a dream or idea of what an organization intends to do. The shared value aspect of this statement depicts everything that the organization does. For AAWW, the mission, vision, and value statements have been coined together to form its all-round statement which is “to serve its freight customers with leading edge technology and innovative, value creating solutions that enables clients to realize their goals”.
Despite the company’s profitability and unchallenged success in the freight industry, a surge in the number of jets as well as the increasing number of low cost freight service providers pose a great challenge to AAWW’s shares across its markets globally. It is imperative to understand that just like any other company, this company is operating in a transforming business world that is impacted by forces that are beyond its control. To maintain its position as a major player in the industry, AAWW must remain conscious of the internal and external environment within which it operates.
The internal environment of AAWW is defined by its strengths and weaknesses. Based on the company’s background and its current situation, it is apparent that AAWW has numerous strengths. For example, the company has a very strong market position due to its diversification program. This can be attributed to the fact that AAWW is the leading provider of Aircraft, Crew, Maintenance and Insurance (ACMI) services in the air freight industry. Moreover, the company has recognized the need for providing logistic supply services due to growth of international trade and has acquired a vast fleet of Boeing 747 planes to drive this sector. AAWW showed its intentions of becoming the best company in the industry when it acquired additional 37 freighter aircrafts and additional 20 modern and high-efficiency Boeing 747-400 airplanes (Atlas Air Worldwide Holdings, 2008). The company is leaving no stone unturned because it hasensured that its fleets of freighter aircrafts have been certified to operate in very restricted visibility environments. Moreover, AAWW is the only Cargo-carrier company in the United States whose aircrafts have been equipped with Traffic and Collision Avoidance systems. Because of the company’s above board customer service and unwavering position in the freight transportation industry, the company’s brand image is one of the best in the United States.
The other strength of AAWW results from the company’s strategic alliance, which is among the best in the industry. In a bid to spread its operations and services, the company has partnered and acquired other subsidiary companies. The company has partnered or acquired part of companies such as DHL, Deutsche Post Company, and Polar Air Cargo Worldwide. AAWW also has a dedicated and hardworking workforce. This attribute that contributes to its strength. As a matter of fact, the company registered the strongest revenue per employee in 2007.
Just like any other company, AAWW has several weaknesses that are hampering its operations. One major weakness of AAWW results from the company’s overdependence on its weak customer base for revenue generation. Statistics indicate that the company’s ACMI registered staggering 28%, 27.7% and 23.1% revenue in 2005, 2006, and 2007 respectively. This is not a good picture for AAWW considering its magnitude in the industry. AAWW also experiences weak revenue growth, which also serves as its major weakness. As compared to its competitors, AAWW recorded the weakest revenue growth between 2003 and 2007. During this difficult period in the company’s history, its revenue growth stagnated at a CAGR of 3 percent (Atlas Air Worldwide Holdings, 2008). AAWW’s main competitors such as Lufthansa and Cathy Pacific Airways on the other hand experienced immense growth in their revenues over the same period.
While the company’s internal environment is defined by its strengths and weaknesses, its external environment is defined by the opportunities and threats it encounters during its operations. Experts contend that the logistic and air freight industry is an opportunity for AAWW in itself. This is because the market for the two has been experiencing unwavering growth in the recent past. In 2007, the industry registered total revenue of $111.5 billion, which indicated a vast opportunity for players in the industry. For that reason, AAWW should capitalize on this opportunity and invest because the industry will continue to grow. This imminent growth is being driven by the growing need for logistic and freight services in the Pacific-Asia region, especially in growing economies of China and India. As Mintzberg et al (2003, p. 65) highlights, low labor costs in this region presents AAWW with substantial opportunity for growth.
The major threat for AAWW is fierce competition from other seasoned players in the industry. This company is threatened by competitors due to several reasons. First of all, the company’s fleets of aircraft are old as compared to the competitors’. This is compounded by the competitive prices that AAWW’s competitors are offering for customers. The company also faces fierce competition when it comes to flexibility, effectiveness, and quality of services being provided. Although the company is renowned for providing the best services in the industry, other players have modernized their services and are giving AAWW a run for its money. Precisely, AAWW is threatened by NT N.V in the 747-400F freight market, Gemini and World Airways in the cargo ACMI services, Air Atlanta in the Boeing 747-200 ACMI market, and Tradewinds, Focus Air, Southern Air, Evergreen and Kalitta in the 747-200 ACMIU markets (Atlas Air Worldwide Holdings, 2008). In addition to the aforementioned sectors, AAWW also faces stiff competition from World Airways and Gemini in the cargo ACMI service market. Seasoned companies such as Lufthansa Chatter, Evergreen International, FedEx, and Kalitta are also threatening to drive AAWW out of business in the passenger chattered airplane sector.
Apart from competition, stringent government regulations also pose as a major threat to the operation of AAWW. The company’s operations are subject to strict aviation rules and regulations that have been laid down by the government. For example, Title 49 of the United States Code allows the DOT as well as the US Federal Aviation to regulate the operations of all carriers. Moreover, all companies are only allowed to conduct their operations under the close scrutiny of local, federal, and foreign bodies such as TSA, the DOD, the EPA, and the US Customs and Border Protection.
Growth and success are two things that companies strive to achieve. However, choosing a good strategy is the key to organizational success and growth. Mintzberg et al (2003, p. 166) contends that companies must grow to accommodate the increasing number of customers as well as satisfy their needs at the highest level. It is for this reason that every company and AAWW must strive to grow. Despite the fact that AAWW is among the largest and most successful companies in the logistic and freight transportation industry, it has to grow in order to survive. Therefore, in order for the company to grow, it has to implement and use strategies that will enable it to perform better than its competitors, increase revenues and sales, exploit untapped markets, and capture market share. There are many strategies that AAWW can choose from as discussed further..
To help shape the plans and decisions an organization has to make regarding growth, selecting the best value discipline is very important. Pearce & Robinson (2010, p.145) believe that choosing the best value discipline will go a long way in defining an organization as a whole and its functions. Despite the fact that there are three value disciplines that AAWW can chose from, namely customer intimacy, product leadership and operation excellence, it can choose one or two that will ensure that it fulfils its objectives.
For a company’s strategic plan to be successful a grand strategy must be adopted. A generic strategy enables a company to develop and run unique services from other players within a given industry. There are three generic strategies that were first proposed by Harvard Business School professor Michael Porter. Although they are different, the three generic strategies namely differentiation, focus strategy, and low cost strategy are not mutually exclusive. This means that a company can incorporate either one or several generic strategies together.
By definition, a grand strategy is a long-term, comprehensive plan of indispensable steps that an organization takes to attain its main goals. The key factors of the grand strategy may include product, market and organizational development through joint ventures, acquisitions, divestiture, strategic alliance, and diversification.
Considering the kind of services that AAWW offers and the type of customers it serves, a customer intimacy is the best value discipline that AAWW can embrace in order to achieve growth. If embraced, customer intimacy will ensure that AAWW focuses on delivering services that are suited to specific customers. As such, the company will foster a mutual relationship with its loyal customers and in the process attract new ones. As a result of the mutual relationship that will transpire thereafter, profits will increase and growth will ensure.
The best value discipline that Atlas Air can embrace in order to enhance growth is customer relations. This value discipline will ensure that the company focuses on delivering services not only to the market in general, but to each customer in particular. Atlas Air should position itself as a customer friendly company by cultivating relationships with its seasoned customers rather than pursuing one-time transactions. Once the company becomes customer friendly, it will specialize in satisfying the unique needs of specific customers. This will create close relationship beneficial for both: the company and customers. Customer intimacy will also allow AAWW to diverse its operations and services. At the moment, AAWW is mainly focused on providing logistics and freight transportation services. However, if the company wants to be successful and grow, it must venture into alternative markets such as passenger flight services. As Mintzberg et al. (2003, p. 156) argue, the introduction of new products or services is important because it serves as a linchpin of a company’s growth strategy.
Regarding the best generic strategy, Porter’s focus generic strategy will be a worthwhile recommendation for AAWW. Currently, the company is providing numerous services that range from freight transportation and logistics to cargo delivery services. Porter’s focus strategy will ensure that AAWW narrows down to a service that meets the expectations and needs of a target consumer base. If the company puts much emphasis on a particular service e.g. freight transportations, the company will end up providing better services to customers who prefer using this service. Analysts contend that better services often lead to customer satisfaction, hence growth, and prosperity of the company.
Finally, the best grand strategy for AAWW is to embrace innovation as a driver for growth and success. Leaders at AAWW must comprehend that innovation is the recipe to organizational growth. As Pearce & Robinson (2010, p. 182) contend innovation can only be achieved by companies that exhibit passion for solving problems and transforming ideas into reality. Innovation is founded on a company’s capability to develop knowledge base, recognize market opportunities, and build internal capacity so as to counter market dynamisms.
In order to remain competitive and retain customers companies must always be innovative by introducing new products and services (Pearce & Robinson, 2010, p. 123). Therefore, AAWW must be willing and ready to introduce a new service that will help develop new customer base that can enhance the company’s chances of growing. As highlighted throughout this paper, AAWW is a company that has utilized diversification to it advantage. This can be attributed to the fact that the company has been very successful in the freight transportation industry, the logistics industry, and the cargo transportation industry. While many would consider this a big achievement, this is just a tip of the iceberg because the company can do more. In this regard, this implementation plan is tailored for a new line of business that AAWW can add to its wide variety of services. Venturing into passenger flight services is a new business line AAWW will focus on as part of the company’s main strategy for increasing customer loyalty and satisfaction. The implementation plan will be based on objectives, functional tactics, action items milestones, tasks, resource allocation, and a deadline. All these factors are summarized below.