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American Airlines Group, Inc. is considered as the leading airline enterprise within the U.S. It tends to be extremely favorable to its customers who frequently prefer using their point-to-point services. Being formed in 2013 after the merger of AMR enterprise, American Airlines and US Airways Group, it appeared to be mostly oriented to both domestic flights as well the daily flights to about 300 locations in 50 various countries worldwide.
It is worth saying that the company turned into powerful marketing leader, gaining the competitive advantage over its rivals. Currently, American Airlines Group, Inc. operates approximately 500 aircrafts. Having the system of low operating cost, it remains to be the best option for potential passengers who are looking for the cheapest ways to travel by air. The previous year American Airlines Gropu received the total revenue of approximately $4 billion, which is almost twice bigger as it was in 2013. The organization consists of nearly 12000 employees and the management operates under upside-down system, where the upper management is seen to support the front line employees. This allows the company to be effective in terms of communicating significant information and make sensible decisions during the decision-making and implementation stages.
American Airlines Group, Inc. is targeted to achieve the maximum highest quality customer service, which is provided by friendliness, customer’s loyalty, reliability and company spirit directed to cover high-frequency, point-to-point and relatively cheap services between fifty-nine American cities and airports.
The existing expansion policy tends to be extremely effective in sustaining the balance within the industry and organization in particular. Low-cost fare options creates all possible conditions for both gaining the competitive advantage and for earning the customers' loyalty (Levine-Weinberg, 2015). That is why the company is extremely successful in capitalizing the customer awareness of the brand. The overall structure allows the company to have strong financials. It can help the company easily overcome all potential, but short-term downfalls.
There are only few weaknesses of American Airlines Group, Inc. First, the company is seen to operate in the extremely competitive market, which means that it is in the constant pursuit of gaining the competitive advantage. In order to maintain long-term relationships with key American airports, the company needs to slightly revise its corporate strategy. The lack of established alliance still leaves the company to operate on its own devoid of any adequate support.
The cost of operation still remains to be under the great threat, especially when taking into account the rising labor costs. There exist the danger of potential terrorist threat, which can lead to the overall service reduction. The organization is also in dire need of providing the appropriate balance between prices of different transportation services in order not to lose the existing clientele. So, the general strategy of scheduling, frequency and facilities should be revised. There is a threat of economic decline, which will negatively affect the customer market and decrease the annual profits.
Porter’s Five Forces Model
Concerning American Airlines Group, Inc., it is worth saying that among the five forces of competition, bargaining power of suppliers and intense rivalry are considered as the most significant for the discussion enterprise. The thing is that these very aspects emerged as the most influential in terms of boosting the company’s revenue.
Threat of new entrants
American Airlines Group, Inc. has approximately 90% of the domestic market. The enterprise is not obviously to be impacted by some new business players in the aviation industry, since the new airline companies are incapable to rival serious enterprises, providing the same services. It is worth stating the thing that American Airlines Group, Inc. operates powerful databases and is equipped with the latest advancements of technology, which positive contributes to the increase in profits (Ausick, 2013). In two recent years only one company had been successful in getting essential profits as the result of high loads if compared to American Airlines Group, Inc. The rest indicators show the complete dominance of the organization in the United States, where some competing airline companies like Transmeridian Airlines, Aloha Airlines, Southeast Airlines and Midway Airlines are seen to be in decline. Finally, the post-entry position of the new entrants does not allow them win the market. Due to the fact that regional markets play a vital role in airline industry, the new entrants usually fail to compete with already existing organizations who dominate such markets.
Bargaining Power of Buyers
The buying power is totally connected with the customers of American Airlines Group, Inc. The consumer demand has been significantly decreased after the terrorist attacks in September 2001 and the recent economic recession. Respectively, the entire industry had to reduce the ASM capacity, which resulted in lower load factors. Such cases aided the other transportation industries to prosper in America. The above mentioned events forced the company into strategic effort to decrease flight prices. The rapid spreading of internet booking alternatives allowed American Airlines Group, Inc. to save the number of customers who continued to buy its services.
Bargaining Power of Suppliers
The supplier power across the airline industry is tightly bound with jet-fuel, labor and air-frames. It tends to be rather problematic for American Airlines Group, Inc. to pay 71$ for oil, whereas jet-fuel prices are seen to not perfectly correlate with oil prices. There arises the constant alternative of choosing between crude oil and jet-fuel, where jet oil is only 20$ per barrel. After utilizing the dynamic hedging American Airlines Group, Inc. became able to control the episodic nature of some jet fuel prices, being targeted to establish significantly higher prices in the future (Yoffie & Kwak, 2001). Such existing hedging programs allow American Airlines Group, Inc. to estimate the future cash flows and suggest the optimal ways of taking control over them. The largest expense of the industry is the labor cost, which currently accounts nearly 45% of total annual costs. This is because of premium salaries and benefits for employees, most of which are the representatives of industry unions who historically received such favorable provisions. In terms of current economic decline there are some difficulties for American Airlines Group, Inc. and if the demand on services is not increased, employees will face the reduction of salaries, which is the only possibly measure to aid the company survive on the market.
American Airlines Group, Inc., being the powerful airlines, is noticed to fight with automobile, train and bus transportation services. The American highly-developed highway system is favorable for car transportation, where the products and services can be delivered to numerous locations. That is why American Airlines Group, Inc. chooses the most appropriate strategy, covering the points linked to long or distant travel, whereas short travel is usually lost to automobile industry. The Amtrak railroad operator can be also treated as the competitor, this it serves only short distances as well. The common organizational strategy is based upon company’s ability to provide comfort and avoid time-consuming services.
First of all, sellers across the industry have very little differentiation in their products. The competition is greatly shaped by price wars and American Airlines Group, Inc. still remains to be the most profitable organization due to its popularity on the market because of the discount programs. Secondly, American Airlines Group, Inc. can be attributed to the discount market, giving the most reasonable response to the sensitivity of customers. In addition, some of its rivals like Delta Airlines Inc, Northwest Airlines Corp. and ATA Airlines are in bankruptcy.
The strategic approach is important in terms of making correction to current management as well as for gaining competitive advantage 9 Dess., Lumpkin & Eisner, 2007). The employer and employees should understand the customers are the major source of profits. That is why warmth and friendliness are worth being considered by every manager and employee.
Despite the fact that many consider money and obtaining revenue as the major thing in terms of running business, it is worth paying attention to that the public anticipates that the enterprises obey all the policy of ethical code with regards to the workers and other participants. In spite of the numerous claims referred to the breaking of CSR, the amount of the enterprises managing according to the principles of today’s standards is not big.
Following corporate norms includes the accountability for the workers’ operations. Each worker is of great importance for American Airlines Group, Inc; furthermore, he/she is considered as a part of this organization. The enterprise is focused on treating the employees in accordance with ethical norms; consequently, the enterprise obviously has two values, which are the principle of responsibility and the regulation in the workplace (Waddock, 2002).
Evidently, it is necessary to take into account the significance of external environment in terms of running successful business. The thing is that its impact on the company’s efficiency is inevitable, since such factors as suppliers, trade union or customers cannot but influence the enterprise. Each company is forced to take into consideration the abovementioned points due to the fact that it is not likely to increase revenues in case of disregarding the external environment.
Apart from external environment affecting the company’s efficiency, it is worth taking into consideration the issue of internal environment, which includes such aspects as the organization’s mission statement, leadership methodology, and organizational culture. Among the abovementioned components of the internal environment, American Airlines Group, Inc. draws a particular attention and interest to organizational culture.
In human resource area, the theory of moving toward an employee empowerment culture was extremely significant as the overall adaptability in most companies was achieved. The most important thing here is to build a corporate organizational culture that could assist in making progress through continuous engagements in the working progress, which results in certain performance-based rewards.
As for American Airlines Group, Inc., it proves to have both stable and team oriented culture. Performance of every employee is evaluated after passing the trial period with the help of specially designed quiz, in the end of the year all the employees have to summarize their development and achievements. The employee which has shown exceptional results can either get promoted, receive pay rise or get another special bonus.
The organizational culture is often promoted via embodying the economic and social rules. As for this year, it is considered as quite promising from the perspective of offering new possibilities. Taking a view of American Airlines Group, Inc., it becomes apparent that the company is aimed at offering its employees more liberties at workplace. As a result of such an practice, the employees are able to make a difference to the personnel organization; it is likely to incite the variety of CSR-referred advantages, including such as competitive benefit, raised efficiency, and new level of employees’ ethics.
AAG Value Chain Analysis
American Airlines Group, Inc. (AAG) occurs to be consistent in its business strategy, organizational culture, customer engagement, and friendly approach to cooperation. The abovementioned aspects remain to be the keystone of the company’s ideology. As a result, the consistency of this company fortifies the value chain, spanning within operations and corporate policy; consequently, it strengthens value in lowering the prices and increasing bottom standards.
As for the primary company’s resources, it is necessary to make mention that these are their employees. The material constituents, including its airplanes are also the valuable element. Moreover, the business models as well the ability to design efficient visions are both extremely crucial.
Regarding the discussion company, it is worth mentioning that upon studying what the client wants American Airlines Group, Inc. develops the product. Considering the company’s value chain management, one should be aware that it is targeted on increasing the effectiveness as well as the client responsiveness. Evidently, in case the companies ignored the dimension of customer responsiveness, they would definitely meet with failure (Belch, 2006). Nowadays, it is obvious that the company developed all the necessary platforms for the customers in order to follows the principle of responsiveness. The thing is that the company has implemented three major techniques in order to increase its effectiveness. They are as follows: CRM, TQM, and JIT. To sum up, it is necessary to mention that the main company’s focus is the customer responsiveness. The interest in members expands to the clients, and that is the fundamental part of AAG value chain management.
The analysis possesses the great business value and it needs to be immediately considered by both senior and lower management. It includes the information on current situation, which significantly defines the marketing state and contains some provisions, which can help establish better strategy, gain competitive advantage and increase the annual profits.
Enter the international arena in order to lead business in target markets;
Develop the powerful strategic initiative, covering all important aspects, via decision-making process;
Maintain the low-price policy;
Stimulate the customer’s satisfaction.
Obviously, the company has all chances to remain the leader with airline industry. It would be great if the competitive advantage could allow the company to consolidate in the international market. It tends to be obvious that American Airlines Group, Inc. is the market leader in airline industry, because of its reliability, comfort and the cheapest prices. One more thing to consider is to use the full potential for development. References
Ausick, P. (2013). “Merged U.S. Airways, American Airlines Will List with Nasdaq”. 24/7
Wall St. via Yahoo!
Belch, M. A 2006, Advertising and Promotion: An Integrated Marketing Communications
Perspective, 7/e., McGraw-Hill/Irwin.
Dess, G., Lumpkin, G., & Eisner, A. (2007) Strategic Management (3rd ed.). Boston: McGraw-Hill Irwin.
Isidore, C. (2012). “American Airlines plans to cut 13,000 jobs”, CNN Money, 2/1/2012, http://money.cnn.com/2012/02/01/news/companies/american_jobs/
Levine-Weinberg, A. (2015). 5 Things American Airlines Group, Inc. Management Wants
You to Know. The Motley Fool. Retrieved from http://www.fool.com/investing/general/2015/01/30/5-things-american-airlines-group-inc-management-wa.aspx.
Yoffie, D., & Kwak, M. (2001). Mastering Strategic Movement at Palm. MIT Sloan
Management Review, 43-1, 55-63.
Waddock, S. (2002). Leading Corporate Citizens: Vision, Values, Value. McGraw Hill
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