Marketing for Managers
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The headquarters of the newly formed International Airlines Group is in London. The provisos and state of affairs of the contract were arranged in agreement with the preliminary pact achieved late last year. The merged corporation will offer clients a better united network, which has a bigger probability for growth. This is because the new airline is capable of optimizing both London and Madrid and avail sustained investment in fresh and innovative goods and services. The two unprofitable airlines have specified that their joint operation will enable them to contend with other key airlines and garner considerable profits. A substantial amount of those savings is projected to come from the lessening or removal of overlying and loss-making European air routes. The coalition of the British Airways and Iberia airlines is the newest in a wave of airline mergers that have been on the increase. The demands for air travel have lessened, due to the current economic calamity. This results in restricted airlines’ access to funding for new airplanes. The union will create Europe's third leading airline proceeding after the market leader, Deutsche Lufthansa AG (LHA.XE) and Air-France KLM (AF.FR). The joint group will boast a fleet of 406 planes, transporting around 57 million commuters every twelve months. The following study focuses on determining the aspects that will guarantee the success of the International Airline Group.
Question1: Marketing Plan
The projected airline will have the next fundamentals as its chief goals:
- To institute and activate a fresh regional airline intended to connect Western Europe with the hastily growing markets of European and trans-Atlantic destinations.
- To give service and contend with unmet demand in some vital traffic categories. The classes include geographical areas that have no airlines as well as those that usually do not have enough planes to serve all clients (Vasigh, Fleming & Tacker 2008). This situation comes about because high demand for airline services exists in other areas. Another aim of the International Airlines Group is to meet the highest travel demands in major regional, regular, and changeable routes where high load issues can be foretold regardless of the existing substandard competition.
- To put into practice an executive and marketing approach that will, from the first year of air travel functions, realize average commuter load factors in the 65-85% range. This will depend on the itinerary and period. A consequent increase in the load factor to the 75-90% range will result in the capitalization of profits and proceeds on the initial investment while lessening risk.
- To attain the expected results, beginning with three medium-sized regional airplanes. The number of planes should be extended to five after a year of operation (Shaw 2004). These planes can be acquired on a dry-lease or procurement basis. They will supplement those planes with busier schedules and serve during peak-demand periods in sporadic routes. An expanded fleet will also accommodate anticipated traveler and cargo escalation in the trade map’s out-years.
- To device functions, and avail a specialized and expansion-oriented image from the start. This will lay down the stage for logical and considered increase, reflecting growth rates expected in the first twelve months of operations. It will also permit the airline to enlarge its national capacity. In the years to come, the airline will evolve from its original regional standing to a bigger continental and transnational carrier.
- As a constituent vital to achieving, the airline's other chief goals are to recognize and extend major international coalitions and associations (Millward 2011). Partnerships with superior and well-established airlines both inside and outside of the main region can permit the new airline to offer a widespread variety of connections.
The new airline's duty is to seal a slot in the expanding air-travel and freight markets that connect Western Europe to trans-Atlantic destinations and Southeastern Europe. The new airline also aims to realize cost-effective, load factors by recognizing and serving major routes that presently remain poorly served. Where considerable unrealized demand exists, the airline will set a fresh standard for air transport and professionalism both inside the intended market expanse and beyond.
By making use of the most recent electronic, informational and aviation expertise, and by designing versatile systems with intrinsic quality control, we endeavor to guarantee the utmost level of service. We also aim at ascertaining that there is sufficient security, with all functions of the airlines based on the requirements and conveniences of the commuters and cargo users. This grouping of specialized equipment, service direction, and value oversight will assist in reducing costs to a minimum while capitalizing on proceeds (Sweney 2011). It will also help create strong client satisfaction and an outstanding reputation. Such advantages can then enable the airline to create concrete inter-airline provisions being indispensable in enlarging its scope and drawing clients in the initial stages. This trend culminates in sustained long-term expansion within the targeted region beyond.
In descending classification of significance, the four vital factors necessary for the new airline to succeed are:
- Hiring a skilled and professional administration team that unites vision with pragmatism. This group should have experience in financial management of large enterprises, as well as a concrete comprehension of the aviation trade. This administrative team should have experience with the deployment of the most recent electronic, and aviation technologies. It should also have an on-the-ground awareness of the region and the markets that are to be served. The team should realize of the critical significance of the establishment's workers to its success. It should possess a dedication to the general mission and purposes of the new airline.
- Smart, progressive, and insistent marketing ideals that make out the airline as a special player that is sharper than all the rest. These marketing factors should depict the airline as possessing a superior level of professionalism and operating standards. Attentiveness to safety should be portrayed, with highly skilled, committed, and professional employees, catering to the commuters’ needs and requirements. The marketing factors should also illustrate the existing advantages availed by sophisticated technology in the airplanes as well as competitive tariffs and affordable charges.
- Discovery, through cautious market research, of poorly served air routes in the targeted region. The airline should utilize current, Western-built national airliners that tender a high level of comfort and security, and have fuel and functional competence and flexibility. The aircraft should meet all the regular aviation standards and offer adequate, but not disproportionate, commuter and cargo faculties on the envisaged air routes.
- Use of sophisticated electronic and information expertise to decrease staffing and other functional charges. The airline should look to enlarge the prospective market base and should contain a marketing team that eagerly captures sales prospects. The airline staff should also look for ways of swiftly attending to boarding commuters, luggage, and cargo management, as this will increase client satisfaction (Schnaars 1991).
Most of the deliberated start-up expenses are distributed in the following areas:
Assumptions that determine the start-up costs are revealed in the next table and chart.
Legal and conferring costs - £200,000
Air route and market study - £100,000
Question 2: Key Macro and Micro Environmental Considerations
One of the chief features that ensure success in the airline business is a tactical management squad that is capable of responding to swift change. A corporation needs to contain a competent and useful internal administration system to thrive in the vibrant airline trade. The International Airline Group should hire visionaries who are able to anticipate the requirements for building liquidity as well as disposing of non beneficial air routes. The visionary or visionaries should also initiate discount promotions and scrutinize the further possibilities of online ticketing. The strategic team should realize that, in order to be able to haul a corporation out of its preceding low place and attain a higher rank in the region; it should constantly maintain a low-working budget even with phenomenal expansion rate. The strategic team would also do well to acquire and substitute old airplanes with brand new ones and educate its staff, so that they can assist in conveying well-timed and professional flight plans for clients. Such hard work assists in creating a consumer base, a ploy usually necessary for supporting long-term expansion and productivity.
In contrast with the above strong points, the airline business is typified by cost challenges (Iatrou & Orreti 2007). Not only is the industry greatly vulnerable to unyielding margins, but it is also restricted by functioning costs and production problems. This is in terms of salaries, policies, fleet, and general price structures that are inclined to deter corporations from competing resourcefully. A weak financial system will incapacitate the corporation and hinder it from meeting organizational goals. This can weaken the firm's competitive position, and at worst, can culminate in the declaration of bankruptcy.
Some airlines rely on the financial backing, granted by their respective national governments, in order to enhance proceeds. However, the fact remains that an airline with an ineffective and nonflexible executive arrangement will not withstand the dynamics of this business. Topics, such as labour disagreements and costly employees, can render an airline’s assets redundant and diminish efficiency. The strategic team selected by the International Airline Group has to be able to deal with matters in such a way that these issues do not arise. It should also deal wisely with employees and not necessarily borrow a leaf from airlines that cut the salaries of employees to keep their companies afloat. The risk in shelling out low earnings to personnel with admirable loyalty is that they may go to the opponents for enhanced packages and improved job environment.
The troubles innate to the airline business have developed over the years and are not a new experience. The industry has been typified by deregulation and nationalization separately. This culminates in insufficient infrastructure facilities, pitiable labour associations, and low consumer satisfaction. The economic disturbances, as well as cost dynamics, have provoked new and old carriers to structure network operations. In these agreements, capacity generation and commuter shifts are realized through coalitions between two or more airlines. Having acknowledged this facility for operation, the International Airline Group should make the most of the inherent clients in the market. Our new airline can also reach out to clients who have shifted their preference for their regular airlines, which have recently suffered from faulty machinery.
The unpredictable airline business structure exposes leading airlines in Europe to a diversity of external threats. Some of this comprises of government policies and stringent laws that dominate the industry as all airlines are presided over by the worldwide and state aviation conventions. Any digression culminates in court cases and trade relations conflict. The strategic team chosen to run operations at the International Airline Group should go to all lengths to ensure that things, such as accidents, do not occur. Apart from the obvious loss of life, such incidences result in drawn out court cases that dislodge an airline from its competitive position. These disasters also cause customers to shift their loyalties to other airlines. The results from airline accidents have been known to force airlines to shut down or relocate their headquarters and start again. In the past, this tactic has been widespread among airlines that suffered accidents. They made such a move in order to evade subjection to conventions and legal consequences of court cases initiated by the relatives of the victims of their air disaster.
Airlines are also a subject to the prevailing economic environment. Fuel is one of the most significant economic issues that influence bottom-line productivity. The recent increase in fuel costs has not only negatively affected profit margins but is also responsible for many companies filing for bankruptcy. The configuration of the airline trade is such that it does not permit even a minimal cost inconvenience. Any such drawback leads to shrinkage of clients. Corporations that do not have the asking price or competitive benefit simply faze out. Many airlines not only constantly modify their goods and services but also assume financial policies in order to stay afloat. The International Airline Group can scout for the places, where fuel is sold at an agreeable price, and situate the main headquarters at the same place. The reality, though, is that price fluctuation of fuel will always be a constant threat. This new airline should prepare itself to deal with a situation whereby fuel accounting reflects nearly half of all working costs.
A corporation's business settings comprise of its exterior influences that impact on internal choices and performances. Corporations participate in environmental inspection in order to spot advantageous and undesirable features and avert negative effects. This helps to maintain cost effectiveness and decrease wastefulness.
Political and Legal
European airlines, like international corporations, are a subject to global and countrywide policies. This is in terms of the assignment of air routes and destinations as well as intercontinental aviation conventions (Holloway 2008). These restrictions not only leave small room for airlines to work in, but they are also the causes for its extremely proficient value chain. Another feature is industrial associations. Employees in the airlines trade, from pilots to the flight attendants, attendants, and technicians, work in the facility and necessities given by the prevalent rules. For this reason, every employee is mindful of his or her right to legal assistance if required. The presence of government recognized labor unions, which have an upper hand over the administration means that the management has to submit to demands if they are within the facility of the law. In the economical carrier trade, however, this is somewhat hard to abide by, particularly if the nature of the claim is in earnings, reimbursement, or distribution of profits. For these grounds, it is advisable for the International Airline Group to steer clear of labour disputes at this time of its inception.
Additionally, actions like terrorist attacks across the globe have had a huge effect on numerous airlines. Apprehensive customers are not eager to voyage by air any more in spite of economical sales charges and premium services. Even if players reshuffle and modify policies to entice clients, it is moderately difficult to sway a psychological apprehension. This means that airlines have to compete for the remnant of clients that are ready to risk flying. The International Airline Group should ensure that the services it offers are unparalleled elsewhere. It should guarantee that customer complaints would be listened to and speedily rectified.
The radical increase in fuel prices in the throughout the -2000s has distressed many airline’s proceeds. Rising fuel charges caused airlines to reduce the quantity of flights in many timetables, in order to preserve fuel and elevate the "load factor," or the figure of paying commuters per accessible seat. The increase in oil price has seen the functional costs of many airlines skyrocket. To balance this trend, the newly formed International Airline Group should increase ticket charges to create more revenue. The airline should also create charges for formerly free objects such as checked hand baggage, coverlets, and food products served during the flight.
The new airline should invest in training the workforce, as some people will inevitably leave a good or bad impression on the clients. These expensive trainings are vital for the airlines' victory. By tradition, airlines do not include training programs for their employees as they cannot afford to or do not have the facilities to provide the necessary training. In its place, they turn to routine training programs tendered by third party vendors in order to realize that requirement. Such plans end up in unsuitable training given to the employees. The knowledge obtained is also substandard and is the same as that offered by other human resource corporations. Due to this practice, redundant workers that cost their companies a fortune have for a long time peopled with the airline business. The newly formed International Airline Group can save on future costs by ensuring that its staff is correctly trained right from the start.
The International Airline Group plans to take a cue from the bank and wholesale division on how to continue to exist in the present economic crisis. The way these businesses have utilized pioneering technologies, such as the Internet, to reach their clients is admirable. They continue to create proceeds, providing methods for the other corporations, as well as airlines, to face their complex problems (Gaskell 2005). Air travel produces billions of pounds every year, and yet acquiesces a collective profit margin of less than one percent. Airlines have lots of diverse problems to be unraveled at the same time. These include high labor expenses, unstable, seasonal demand, and susceptibility to weather patterns. Our new airline plans to utilize technology in order to improve consumer relations. The airline can suggest to commuters a Web interface adapted to a precise brand of travel. An individual may fly regularly, check many bits of luggage, or want to take pleasure in definite facilities such as an airport club. Our website will offer ways in which to assist the client to access these services. The Web interface can also show the client a number of services that charge a higher price, but which offer more preferred benefits. Another opening lies in the computerized check-in equipment many airlines now activate. In place of checking in with airport employees, commuters will be able to swipe a credit card through the mechanism, have themselves recognized, and stamp out their boarding passes. Currently, there are carriers that run their own automated machines, and commuters of other airlines may not utilize them. However, just as one banking enterprise permits the clients of other banks to use its ATMs for a small price, the airline industry could realize additional proceeds from permitting all commuters to check in through the computerized interface.
Question 3: Target Markets Selected and Corporate/ Brand Position
Before the economic downturn became a reality, many airlines preferred to present the finest services in order to acquire a larger number of commuters than their competitors. First class cabins presented gourmet food and frequently provided passengers with sleeping materials such as cushions and coverlets. The recession has led to airlines rethinking these strategies. Even though first class passengers, though few, can provide a lot of revenue for airlines, they are usually not amenable to the idea of creature comforts being eliminated. The International Airline Group will observe the wisdom of adding more flexible commuters- the business class commuters. The corporation will soon get underway a number of business class only journeys that depart from an airstrip in the capital’s financial district. The aim of this move is to assist well-informed business flyers to utilize their time on the ground for achieving business deals and not in travelling to and from the airstrip.
The new brand campaign, which seeks to forge the former British Airways and Iberia into one efficient airline, focuses on the potential capabilities that will be brought by both these institutions. It details the amazing client mass that will be enjoyed by the IAG due to the global networks enjoyed by both institutions prior to the merger. The brand aims at strengthening the long-standing association that both companies have always maintained with their respective consumers. The marketing program will also include a website through which consumers will be encouraged to chat about why they desire to fly with the International Airline Group. The clients will also be requested to suggest any improvements they believe can enhance the quality of the services we offer.
Question 4: Evaluation of the Marketing Mix the International Airlines’ Group Mixing Strategy
Product or Service
The International Airlines Group plans to have low cost flights to European destinations. There will be no free food products or drinks offered on board. Clients who desire to eat or drink will have to pay for this experience, which, for a long time, has been unreservedly offered in most of the world’s airlines. These new regulations have been established as a way of cutting costs, in order to ensure that the corporation realizes a healthy profit. The International Airline Group has also created other revenue streams - or supplementary revenue sources. The corporation has arrangements with the Hertz automobile rental company, and numerous hotel industries, as well. These companies will serve to transport consumers who request for them to and from the airport, at an affordable fee. Other examples of extra proceeds will consist of mobile phone cards and bus receipts.
The International Airline Group has decided on low fares that attract customers. This is not a decision that will always remain the same, but we shall reconsider the possibility of changing prices, as we gauge our success rate in the future. 70% of spaces are traded at the lowest two charges. 30% of chairs are priced at higher charges. The remaining 6% are retailed at the maximum fare.
The International Airline Group will not utilize travel agents and so will not need to set funds aside to pay agency commissions. The airline will use express marketing methods to enlist and hang on to its consumers. It will extend goods and services to them that have been perfected and are unique to the airline (for instance, Client Relationship Management). This will lead to a decrease of costs. The clients who wish to travel with the International Airline Group will book tickets online. This will save them 15% on travel agency charges.
Our airports, which are situated in every major city around the country, are new and easy to reach. For clients who are tourists in the country and are not well aware of the towns, there are hertz rental vehicles that are ready to offer transport from people’s homes to the airport. The airport, where we are situated, was chosen because it is less busy, and so there will be less time wasted when the aircraft is ready to depart. It will be able to turn easily around prior to flying off.
Many of the International Airline Group’s outbound airports are not international or busy. For instance, on taking off to Copenhagen (Denmark) you reach Malmo (Sweden) first. Secondary airports, which are usually smaller provincial airports, rely upon the single carriers, and many airlines add a lot of yielding to their bottom lines by ferrying people to areas that do not experience a lot of air traffic. The larger airlines are also reluctant to fly to these areas, due to the lack of many clients in those localities. Costs are lesser, and airplanes can easily be turned around more rapidly. Maintaining aircraft in flight as much as possible is an additional significant piece of the low-priced jigsaw. The International Airline Group will realize this factor if it endures in transporting the clients headed for remote areas as it caters to the masses that fly often.
The International Airline Group does not spend vast resources on advertising. In fact, the majority of advertising should continue being done from within. Simple advertisements will inform the passengers that Ryanair has agreeable fares.
Our pilots are employed when they are still cadets. They work hard, take advantage of timely promotions, and then move into other spheres after 10-years or so, in order to advance their careers. The cabin staffs, as well as employees on the ground, regularly pay their uniform to be washed. They spend in their own teaching, bearing in mind the fact that these skills will equip them for other tasks in the future in a more advanced capacity. They are largely responsible for the safety of commuters as well as the ancillary proceeds collected onboard.
No checking in is necessary in the stands of the airport. An individual simply has to expose their passport to be viewed. They should also give their reference number. Individuals cannot opt for preferred seats (Fine 2009). Everything strictly operates on the function of first come, first served. This practice ensures that commuters embark speedily onto the plane, and disagreements over who gets the preferred window seats are reduced. There are not any air bridges (the channel that links to the side of the airplane when passengers are boarding it) at the airport. One simply walks or is driven to the airplane. Luggage is set down directly onto the terminal. However, if an individual’s carrier bag is wrecked, the airport will not be responsible for the possibility of misplaced or strewn items.
Question: Likely Outcomes and Recommendations
Competition for Substitutes
The alternatives for manufactured goods or services control its final price configuration. Depending on how similar the alternative product is, demand will be varied with respect to the cost. This means that clients are more aware of a price every time there is price modification. They are most likely to change over to the substitute commodities or services, in order to gratify their desires. In the travel business, rivalry is intrinsic in substitutes. Vehicular transport, trains, and water transportation are almost similar alternatives to air travel. This exposes air travel to a high risk from the alternatives (Doganis 2005). Airlines are obligated to keep one fee even as they struggle to survive the competition. A divergence in the cost level will probably result in clients moving to the other transport substitutes that are easily accessible and available.
Threat of Entry
The low-priced challengers are facing the elevated costs connected with commissioning their airlines even as their fleet of airplanes slowly ages. Their workforce is attracted by the existence of new players in the field and competition intensifies. At the same time, the economical airline business is growing swiftly in terms of proceeds. In 2002, the business had the increased revenue of $20 million pounds in net profit, in spite of a deep loss the year before. The fact is that the economical carriers business is not only packed with extreme competition, but there also exist monetary vulnerabilities. Accordingly, one observes the speedy entry and departure of other competitors that entered the industry before carefully assessing the factors necessary to maintain presence in the airline industry. What this trait of fast ingress and fast exit accomplishes in the business, is that it strengthens the contest by keeping the major players on their toes. Many of the surviving airlines also learn to be distrustful of their competitors in all features of operations.
New airlines are also continuously coming into the airline industry. Some examples of new players are Jet Blue, Independence, and Ryanair (Farris, Bendle, Pfeiefer, & Reibstein 2010). All of these found entry into the no-frills airline business much easier than the full service business, probably because the charge for functioning is higher. Fewer monopolistic players also characterize this business, and the consumer level is too little for each airline to achieve important proceeds. Thus, without any obstructions to entry, the costs and proceeds are inclined towards a competitive level. Hence, competitiveness becomes intrinsic in the companies' ability to soak up sunken expenses, value-added services, as well as the firm's capacity to gather proceeds from the spent capital resources.
Rivalry between Established Competitors
The airline business is distinctive in the sense that the general rivalry and productivity is reliant on the competitive charging of goods and services. This trend pushes below expenditure operations so that there are loss experiences throughout the trade. On the other hand, the business is also alert to the realities of innovations and non-price antagonisms between competitors (Clark 2009). Concentration in the quantity of airlines contending against each other facilitates corporations, in order to unite market share through tactical pacts.
Bargaining Power of Buyers
Corporations function based on customer demands and market contributions. Market participation may consist of human labor, monetary resources and industrial as well as specialized skills (Chernev 2011). Customers pay a definite charge for the services retailed to them by the corporations in the structure of yields. Such dealings generate significance to the purchasers and the sellers because the reimbursements are reliant on the relative financial power of the two (Belobaba, Odoni & Banhart 2009). When consumers are susceptible to price alteration by corporations, they are considered to have a negotiating power over the company. This can be because of the significance of the whole cost or the distinguished goods or services that the business is supplying. The consumer tends to change to the substitute suppliers if the cost of a definite artifact or service is raised and they are not prepared to pay for it. In the airline business, the purchasers have a negotiating power, as they are cost conscious. An alteration in the cost of the tickets of the International Airlines Group not only shies customers away from the IAG, but also from other airlines.