Strategic Management – Aviation Industry In Asia-Pacific Essays Examples
The business in Airline industry, much hindered due to reduced profit margins enables the industry to take several strategic changes to keep the industry alive. These includes in reduction of costs and increase in income growth by means of improved customer relation . However, the industry is growing continuously all over the world but not much profitability and consistency are tangible in this trade. The industry has grown from US$369 billion to about US$749 billion in 2014 in accordance to the evaluation of International Air Transport Association .
Most of the growth in this sector, driven by low cost carriers is controlling about 25% of the world market and that are developing in the emerging markets. Growth implemented from continuous gain of the carriers in the developed market, still the profit margins over all are less than 3%. The commercial sector in aviation governing, the airports, airlines, manufacturer, makers of jet engine, the travel agents and the service companies are gaining neat profit. The companies those moving passengers from one place to the other are struggling to break implement the lasting paradox of the industry. These companies are the most crucial links in the chain. All these happen due to the complex nature of the business revealed due to considerable degree of regulation that minimizes consolidation. The weakness of the airlines relates to various exogenous events that are happening regularly like security, volcanic eruptions, infectious diseases and the one going price pressures. This industry has also seen price reductions for as long as decades. All these circumstances needs the airline industry to focus on growth since their restricted profits depends mainly on gain of revenues as well has increase in productivity to increase profits . This way the commercial airlines find the way to a number of trends while plying across the globe, which will determine their carrying performance in the future.
Significant Strategic Challenges of the Aviation Industry in Asia Pacific
The Aviation industry in Asia Pacific is facing significant strategic challenges in ensuring growth and profitable revenue. One of the important challenges is increase in consumer expectations , people are familiar in seeing major improvements in various sectors where people are buying and selling products. However, the aviation industry not much changed in terms of hard products and remains as an unsatisfactory grumbling experience. Dissatisfaction among the consumers is addressing the carriers to upgrade their hard products i.e. the aircrafts. This is much expensive and gaining revenue is a long-term process, but developing the soft products, such as welcoming and faultless customer experience covering all aspects of travelling industry is much cheaper. This ensures a behavioral and cultural change within the organization especially in customer facing and front line employees .
Increased pressure in reducing costs as well as improvement in operation is another challenge they are facing today. The challenging is to reduce costs in fuel efficiency as the fuel covers about 40 to 55% of the operating system. The carriers with enough finances are trying to modernize their journey in implementing aircrafts that are more fuel-efficient . Reduction in cost needs development in structure of the organization and in operating model and practice of works. Now a day’s transferring passengers are becoming more complex and more costly than the transfer systems in earlier years.
Another important challenge is due to rapid growth in aviation industry the industry is shifting its center of gravity. The carriers based in Middle East such as Emirates, Qatar Airways and Etihad Airways are taking away most of the most of the profits of the Europe Asia routes. The carriers in Middle East are dependent on connecting traffics, since their national market is much less due to less population in those regions. Their geographic situation has given them the unique opportunity in capturing the long market growth. These LCCs are experiencing growth rates, which are above average in terms of the industry since they have many first time fliers. They are also facing growing customer experiences in developed markets. There these carries require in finding the proper balance in between investments to enhance the experiences they are offering as well as in maintaining their advantages in costs. The industries less margins ensured due to its fragmentation and results in overcapacity in some markets. Still the US carriers are improving financially, fundamentally through reshuffling their liquidation and through a series of key amalgamations .
Strategic Challenges from Ethical & Global Perspectives
The broader aspects of aviation issues give major emphasis on the environmental related problems that are in relation to sustainability. Aviation industry is one of the significant sources in noise and air pollution contributes a major cause in global warming . The main sustainability aviation issues govern air and noise pollution in local areas, airports and the effect of greenhouse gases and emission due to other causes. In the end, the high competence gains in energy consumption rewards by the market’s growth annually. The complete environmental footstep will considerably increase while those of other sectors will decrease. The increase traffic growth strengthens all issues in relation to sustainability and gives rise scarcity in infrastructure. The significant issues in enhancing the management in sustainability are more licenses to function and nurture. The fuel consumption associates with reduction of resources and greenhouse gas release, accounts for the expenses of more than 15% of airline revenues . Other important issues are reputation and positioning, motivation of employees and retention and other aspects in regulation, taxing and charges. These value drivers reveal that there are operational reasons in dealing with sustainability issues. These depend on the size of the company, model of its business and the culture in its home marketplace. The present financial pressure will for the time being, curb pressure on the industry and holdup the introduction of actual procedures. Due to rising impact, the sustainability issue earlier or later is back on the program.
Relevance of Strategic Planning to respond to current identified challenges
The aviation industry heeds to take several measures in response to the current challenges identified. As in any other industry, recognizing individual customers’ desires and other customer related behaviors is necessary to deliver services in personalized manner . The airlines must develop their dependence on the offered reliability programs that enables in generating major customer data. The gains of more customer information ensure relationship and better customer experience and targeted gifts. These results in gaining more subsidiary return through devoted customers where more proportion of gain is coming through straight channels . This approach will help the full service carriers to unbundle presented products and in charging fees for some particular features of the trip.
The airlines need to use new technologies internally to stream line their operations and reduce costs . Technically sound engines alert safeguarding and functioning centers of performing problems while an aircraft is still on space and can ask for a substitute part be waiting when it lands. These will decrease down time and significantly progress performances and reduction in driving down costs. While reducing the expenses, the airline has to understand where to cut. This relates in identifying the necessary abilities that differentiates them from their competitors’ from the viewpoints of the customers. The management sometimes needs to be merciless in cutting expenses in many areas that are not applicable in security, name, branding and consumers’ value. Since the lawful structure of liquidation, reformation and consolidation in United States are not valid in other markets and government rules will continue in restricting much consolidation, the airlines could carry on to seeking collaboration that can balance and even progress their operations. In most cases, these collaborations will be more under attack and synergistic than customary association that now govern. These alliances will ensure in sharing of routes in broader aspects but will not allow airlines in tactically fitting in the particular gaps.
All the above discussions ensure that the aviation industry is long struggling with margins, but the present growth period in most of the markets along with better technology and preferences of customers ensures genuine opportunity. By implementing all the procedures discussed above, the carriers will have better relationship with the customers, selectivity in cutting expenses and progress in their monetary position in a sustainable way. These achieved either single-handedly or with the correct set of associates.
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