Strategic Analysis of Delta Airlines free essay sample

This report will be discussing strategic management to a company in the airline industry. This report will examine a chosen company’s strategic management and outline the stages. Strategic management is analyzing the situation facing the firm, also on the foundation of analysis formulating a strategy and lastly implementing strategy. Strategic management is the identification and the description of strategies that can be used by managers so as to attain better performance which in turn will ensure competitive advantage for their organization. It can be used to determine things like the mission, vision, goal, values, mission, timeline objectives, roles and responsibilities. 1. 0 Introduction There are three ongoing processes that strategic management of an organization entails; these are the analysis, decision making and action. The main concern of strategic management is the analysis of strategic goals, as well as the analysis of both the external and internal environment of an organization. A strategic management directs the overall company goals, which includes multiple stakeholders, incorporates short term as well as long term objectives, and oversees the trade-offs between effectiveness and efficiency. We will write a custom essay sample on Strategic Analysis of Delta Airlines or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Having a good management strategy, an organisation is able to achieve its goals and meets its expectations. With the used use of well formulated strategies, a company will always prosper and generate great results. Without well formulated objective goals a company or an organisation cannot exist, since every company has a reason for it existence. After analyzing of the organization’s objective goals and a good strategic plan, leaders are expected to make strategic decisions; the decisions should address two basic questions: What is the industry that we should compete with? What formula should be used to compete in those industries? A company needs to know its immediate competitors once it starts operating. A company should formulate a well design that will enable the company to beat all its competitors in the market and so that it can make more profits from its consumers or customers. These questions can be useful for the organization in both domestic and international environment. Finally comes the action that must be acted upon; unless action is taken, decisions are useless. It is the actions that are taken by firms, which implement the strategy (Mintzberg, Ahlstrand and Lampel, 2009). In this analysis, three major processes of strategic management processes will be discussed in a more detailed manner. These strategic processes are strategy analysis, strategy formulation, and strategy implementation. They help the company in overcoming the many challenges that companies are facing in today’s global market place. Strategy Analysis- contains general environment analysis and competitive environment. It is the starting point of a strategic management. Strategy implementation is the process in which the management sees that all the set objectives and goals are effective and have value to the company. It ensure that the organisation has a proper strategic controls. Strategy formulation is of how the organization is to compete in different business environment to attain competitive advantage. To see that the company’s set strategies have become a reality, leaders should take the necessary resource and take time to design the organization. Strategy Implementation Strategy Formulation Strategy Analysis 2. 0 Strategic Analysis Strategy analysis might be seemed upon as the first spot of the strategic management development. It is made up the ‘advance work’ that has to be done so as to efficiently formulate and implement strategies. Lots of strategies are not succeed for the reason that manager might fancy to formulate and implement strategies, not including a cautious analysis of the important goals of the organization and not including a thorough analysis of its external and internal environment (Lumpkin amp; Dess, 2005). 2. 1 The General Environment The general environment define that the progression of developing strategy for a business by exploring the environment and business in which it activates (Business dictionary, n. d. ). 2. 1. 1 PEST Analysis PEST analysis will be able to be utilized to help detect trends in the external environment that will eventually discover their method into the competitive environment. It gives a relation between the general and competitive environments in that weak signals in the general environment are able to become main forces for transform in the competitive environment. (Henry, 2011) 2. 1. 2 Strength Delta airline uses merger so as to be able to expend its business. In 2008 the company merged with Northwest airlines. It operates in Europe, North America and Asia/Pacific regions. Once the merger was complete, Northwest Airlines and all its constituents become wholly-owned by Delta Airlines. The merger saw to it that Delta Airlines started operating in the Northwest for FY 2008. In the period of two month that is from October of 2008 the time the merger was completed to December of 2008, the company had increased it revenues to $2 billion. Having a flexible nature, allows Delta to improve customer services, and in the long run be able to achieve its strategic objectives. Delta airlines have multilateral and formed alliances with other airlines. This is beneficial since the airline is able to gain access to international airlines. By forming alliance, the airlines share codes, access to passenger lounges, promotions, airport gate and ticket counter, marketing agreement and ticket office co-location. 2. 1. 3 Weakness Delta airline tend to be over depended on North America airlines for its revenues. 66. 4% of the company’s revenues are derived from North America. By having heavy dependency on the market, the company is susceptible to any change that s associated with that geographical region. Delta airline has high indebtedness, in the final financial year of 2008 of $16,571 million which was an increase of 84. 1% over the financial year ending in 2007. The industry also has poor communication method; there is no clear link from the management to the passengers. The airline is not innovative, in that it does not come up with new ideas, what the airline does, is the same thing that is being done by other airlines. 2. 1. 4 Opportunities. There is an expected growth of international boarding on big careers, and smaller regions are expected to grow. Total aviation fleet is expected to grow to 1% an year. This is an advantage to for Delta airline that is engaged in the air transport system, it is therefore position to capitalize on the ever increasing US region airline industry. The growth of maintenance repair and overhaul (MRO) market is the other thing that gives support and opportunity for Delta airline. There is a lot of service that is offered by Delta that is from MRO, and with the growth of MRO, creates an opportunity for delta to capitalize on the industry as well as expanding its revenues and profits. . 1. 5 Threats. The economical crises that is global, has affected Delta airline severely. The crunch from the credit, the financial crises and the oil prices going up affect the airline industry directly. A don turn in the economy posses as a challenge for Delta airline, the financial turmoil has put delta airline in a fix, and any further global economic recession will hinder Delta’s ability to be able to achieve and sustain profitability. 2. 2 The Competitive Environment The competitive environment impact on an organization’s performance more directly. Some of the factors that influence competition are cost, events, labour and season. These factors do not only affect competition, they also influence how the competition will be rendered. By identifying certain competitors, cost can be reduced, and firm can put more efforts on identifying the risks. For Delta airlines to be able to deal with competition, they should recognize the need to grow. 2. 2. 1 Porter’s Five Forces Framework. Evaluating some of the determinants of industry profitability and assessing firm performance by Porter’s five forces framework is a suitable tool of analysis. The framework allows a firm to evaluate the attraction of its business founded on the relation strength of those five forces. Given its resources, a firm is able to take a judgment as to which industries it is able to compete in most effectively and place it to decrease the opposing effect of those forces. According to critics of the 5 forces framework, the main limitation is its static nature (Henry, 2011). 2. 2. 2 The Threat of new Entrants. In terms of The Threat of new Entrants means of transportation, especially airlines are vulnerable. Because of the deregulation in 1970’s~1980’s, legal entry barriers removed. According to the latest statistics, if someone invest only $ 35 million, it is possible to advance the airline industry. This is tolerable if you would afford enough amounts for small and medium enterprises. The threat of new entrant is quite high. (Gross, S. , Schroeder, A. 2007) The bargaining power of suppliers in the airlines industry is vulnerable from In terms of the bargaining power of suppliers. The bargaining power of suppliers will be stronger when the demand of supplier is low, when the supplier to supply the goods has been differentiated and when there is no alternative to the provider (Lynch, 2008). . 2. 3 The threat of substitutes. There are three main forms of threat of substitutes in the airline industry. Rail, road and boat services are existed. Of these, the rail is definitely the main threat in the air industry. It serves a great service delivery around the major city. However, Delta airline promise that offer faster journeys. For instance, from New York to LA it t akes 5-6 hours by airplane, on the other hand, train takes 2-3 days. 2. 3 The internal environment. An internal environment is the environment that is within the firm. They are the policies, manage, employees and working condition that has been set for them. SWOT analysis is important for the firm as it will enable it to create a situation where it can attain competitive advantage (Thompson and Martin, 2005). Using Porter’s five force Delta airline should be able to determine the best approach that they can use so as to attain stability in the internal environment (Henry, 2011); by doing so the firm is ensuring that   all the areas that constitutes the internal environment have been looked at and no loop hole has be left. This will strengthen the operations of the firm, creating policies that will stabilize the firm, as well as ensuring long term results. 2. 3. 1 Value Chain Analysis. Value Chain Analysis is a strategy tool using to analyze internal company actions. Its aims are recognizing, which undertakings are the most valuable (i. e. are the foundation of cost or diversity benefit) to the company and which ones is able to be improved to offer competitive benefits (Strategic management insight, 2012). 2. 3. 2 The resource-based view of strategy. The height of competition in an industry is important if the industry is to underlay its strategy. An organization should be able to understand the elements that make the structure, and take action in order to influence or perhaps mitigate the brought effects. Managers should be able o identify the sources and how they are likely to affect the strategic decision. For instance, the concern of the simply nature that other firms are allowed o join the industry. Since if everything is constant, and then entry barriers should be put so that they can ensure profits that are above average ((Henry, 2011). . 0 Strategy Formulation The process of choosing most excellent course of action for achieving organizational objectives and from accomplishing organizational purpose Strategy implementation- contains planning the organization’s structure, managing human resources, developing decision making process, distributing resources. There are two things that should be determined by the manage rs when it comes to attaining competitive advantage in the market, producing substances that are unique, or selling at low-cost, and at times a combination of both (Henry, 2011). When organizations come up with idea that works, they are copied by their competitors, almost immediately. For instance in the 1980’s, American Airlines tried to attain a competitive advantage by creation of frequently flyer program. A few weeks later all the airlines had copied this idea. This made frequently flyer program change from a competitive advantage to a measure of competitive parity. Delta Air Lines Industry: Airline Founded: 1928 Country: United States Employees: 78,400 Sales: $35. 12 B (April 2012) Asset: $43. 5 B (April 2012) Profit: $854 M (April 2012) Delta Air Lines (Delta) is a principal United States airline. Delta Airlines was established by Huff Daland Dusterson May 30, 1924 in Georgia. Delta Air Lines and branches control over 5,000 flights daily and have nearly 80,000 employees. Delta offers reserved air transport for customers and cargo all through the United States and all around the world. The Companys path network gives it existence in all domestic and global market. Deltas route network is placed on the core system it controls at airport thus enabling it to reach different destinations. Each of these core processes contains flights that collect and allocate traffic from markets in the geographical area surrounding the hub to domestic and international cities and to other hubs (Forbes, 2012). 3. 1 Business strategy level. When it comes to business level, Delta airlines is focused in ensuring customer satisfaction, despite what other airlines are doing. Though competition might be proliferated, Delta airlines have always managed to be on top by ensuring that customers get the best. The airline does not follow the rules that are set by other business when it comes to prices and fare. In the airline industry, Delta, united, Southwest, US airways, American airline consist of large companies and between them dominate the airline industry with a combined market share of around 71 percent. These are the close rivals of Delta airlines, and when the firm is doing its strategic management, it should also look into these rivals, so as to plan a way to say a head which is the whole point of strategics and planning. The point is not copying what these firms do, but finding a weakness in these firms and using that weakness to attain advantage. 3. 2 Corporate level. In order for an organization to attain success, they should link human resource management and corporate together. This would be helpful in situation where the firm is required to make quick decisions and respond rapidly to a situation. The Delta airline makes the necessary moves in order to establish great chance in the survival in different business fields and achieve an appropriate amount of diversification. The main concept of corporate strategy is that the organisation identifies the types of business the company should invest in. It also tackles the question of in which line f business is the company suitable to take? For a company to be success it should always do a survey on the best business market to invest in. The management does estimates of every business and the competitors in the market even when starting the organisation. Delta airline has linked the two together, and this is the reason that the company is always active and does not take a long time to respond to situ ations. The expansion of Delta airline has been as a result of the way is doing well in the airline industry. Otherwise corporate strategy helps the company to review its ability to expand or reduce its expansion. When airline form alliances, they gain opportunities to handling the airport ground, maintainers of aircraft and in-sourcing. Code sharing enables airlines to sell seat as well as expansion of the number of destinations. Airlines with the code sharing are allowed to offer. Consistency is another thing that has made Delta makes it in this competitive industry. Since Delta is a large airline, and even during the slowdown, the company has recorded a finical performance that is significant in the past years. The company has increased its revenues, due to the mergers, increase in fare, and also increased service to international destinations. . 3 International strategy and Globalization. The fact that airlines had gone global, even before globalization, one might expect that as the global experience enriches, then the airlines especially the legacy carriers would be well positioned and take advantage of globalization. That has not been the case, globalization unlike the opportunity that i t has offered other industries, when it comes to airlines, it has been a threat. This is the reason that Delta airline has secured its position, globally by forming mergers and partnership. This has made it to be on top and deal with competition as well as issues like restrictions and antitrust. 3. 4 Assessing organizational Performance. So as to be able to analyze how a firm is doing in the industry. This is important as it will enable the firm to identify the areas that they need o improve on, as well as compare what they are doing and what other firms are doing (Capon, 2008). Performance should not be assessed as a firm in general, but to be able to attain results, firms should analyze the performance of every sector. This would enable the firm to see the area that re bringing it down, and plan for the best method that these areas can be improved. If one sector is not working well, then chances are this could spread out to other fields and in the long run; the firm can be affected entirely. Delta airlines have a method that they use to analyze the performance of the firm. In fact, their website has been open for customer’s feedback, so that they can be able to identify some of the areas that the customers were not satisfied with. Analyzing of the performance and operation of this organization is hat has kept it on the top. The company strives to ensure that customers are satisfied, and happy with the service. Delta strives due to the fact that the management has ensured that the organization is characterized with the right people, guidelines, and principles. The company has also created an anonymous channel where complains can be forwarded by the customers. When it comes to the workers, Delta Airlines offers the best employee package. In the website one can be able to read some of the feedback that have been given by the employees, both who are still working with the airline, and those who are not. Ensuring that the employees are satisfied is one of the strategies that Delta Airlines use to deal with competition. It is believed that if employees are happy, chances are they will deliver service that are of quality to the passengers. 4. 0 Strategic implementation 4. 1 System change Delta is recognized throughout the industry as unique, due to the extensive flight and brand legacy. This is evident after the merger between Delta and U. S. airlines, even thou these companies were both public acknowledge, they opted to go with the Delta airlines as the brand name. Delta has been faced with bankruptcy, but has managed to fair well, it has attempted airline at a low cost, and any route implementation, thou some of the route mentioned have not been implemented. Even after the enormous proliferation of competition schemes in business strategic literature, the most influential proliferation in the last two decades have been, competitive positioning and resource base view. Firm’s resource includes; assets, process of organization, capabilities, attributes, knowledge and information. They are inputs that are used to facilitate an organization to be able to function. Not all resources that are available to the organization have importance, there are only a few that can be used to insert value and create strategy, which puts the organization in a competitive advantage. 4. 2 Strategic leadership. The formulation that an organization uses to stay ahead and attain competitive advantage should be unique and original. The mistake that is done by many firms, is copying he strategic from other firms in the industry and by the end of the day, there is no level competition since everyone is offering the same things, techniques and innovation ends up being a forgotten element. So as to see that the set strategies have become a reality, leaders should take the necessary resource and take time to design the organization. The study of strategic management is a study that enables one to understand why some organization outperforms others. For are this reason, manager are expected to have a plan on how the organization is to compete, o that it can not only attain competitive advantage, but also to have this advantage over a long period of time. There are two important questions that the firm should focus on if they want to attain a length competitive advantage (McGee, Thomas and Wilson, 2005). What method must we use in order to attain competitive advantage? How can we create a competitive advantage that is unique, long lasting and not easy to be substituted of copied? 4. 2. 1 Political. In a political context, Delta airlines have dealt with various political issues over the past few years. It has been tasked with balancing and satisfying both its potential customers and the numerous governments it continues to operate its business with. Over the past few years, Delta has run into hot water over its policies in the middle east and domestically, in America. A prominent example was its controversial tie up with Saudi Arabian Airlines in 2011; whereby it agreed to refuse services to Israeli passport holders and Jews while operating over Saudi Arabian soil. This was agreed in principle and practice, in accordance with Saudi Arabian laws. 4. 2. 2 Economical. The airline industry has been subject to a handful of economic impacts. Such as, slowdown in the growth rate, rising Crude Oil Price. The most significant impact in recent years has been oil price, rising all around the world. Airline ticket price is adjusted by Crude Oil Price, and its effects are harshly felt on the airline industry. New York Stock Exchange (NYSE), crude oil for transport in June rose by an additional 40 cents to $91. 83 a barrel; and Brent North Sea crude for June transport improved 32 cents to $102. 05 in the morning trade (The News, 2013). Another economical factor is worldwide economic crisis. The recent financial disaster is the worst the world had realized since the Great Depression in the 1930s. Therefore, airline industry is affected by the world financial crisis (Yale global, 2013). . 2. 3 Social. Increasing needs of popularity of holidays overseas has been tending to an explosion in a request for air travel. All around the world, an average age of the population is growing steadily. Babies are born fewer. Moreover, enhancing medical skills have made many people live longer. Therefore, family and aged people have influence on the airline industry. Air travel demands are increasi ng gradually. 4. 2. 4 Technological Current airplane is more economical to manage. The 777 can hold the seats around 270 passengers, while another one can seat around 240. Furthermore, these are purchased using for the far distance routes. Delta had come to be the biggest air company consuming the Boeing’s out of production 717 planes under the contract that was produced in May, 2012 (US daily voice, 2013). Moreover, Delta has started to invest over $3 billion in technological facilities, service and technology global products to improve the passenger experience in the air. The investment has begun in 2010, and it will be maintained until 2015. Delta has finished setting up of full flat-bed seats in all deltas’ aircraft cabin (Marianas variety, 2013). . 3 Cooperate governance Having the right channel and right people to work in the airline, and guidelines is what has made delta airlines to be on top. The management has implemented that having connection with the right people and doing business in the right manner is what will put the business on top. 5. 0 SWOT Analysis SWOT analysis consents an organization to evaluate the suitable of its recent strategic to its moving environment, and to support turn possible treats into opportunities, and weaknesses into strengths. It can assist an organization to recognize its possessions and abilities more obviously, and or evaluate whether those are advantage or a restraint to developing opportunities in the market field. Finally, it is able to be used to support the organization’s formulate strategy (Henry, 2011). SWOT analysis is an important part of strategic management as it can be used to pointer for the manager at the areas that need to be looked into, and the area that are working, for the advantage of the company. It can also be used for planning of the organization future plans, by taking advantages of the opportunities that are available for the firm. Firms owe it to the clients; and these are the repository of firm’s activities. At the heart of both the management and at the heart of resides customer. Delta airlines are aware of the importance of the resources, they tend to fish all the resources that are necessary to satisfy customer, and put it at the bases of the policy. Delta uses the resources that are available to them to attain competitive advantage. Things like planning flight, more destinations in comparison to other airlines and also the fact that customers trust the airline since it has been in existence for a long time. 6. 0 Conclusion Delta airlines seems to have a bright future, this is due to the fact that despite the turbulence that has affected the airlines during the past decade, Delta has managed to beat the storm and be more successful in comparison with the competitors. Delta has come up with innovative customer friendly features as well as creation of a look that is more defined, that is in terms of their route structure and business practices. Even when fuel and labour cost went high, Delta managed to offer up to standard customer service at rates that are comparable. With the pans and changes outlined in the report, Delta airlines seems to safe for takeoff, but one should be trends with care, it might appear that the airline is headed for a ride that is bumpy. References: Business dictionary. (n. d). Strategic Analysis. Available: http://www. businessdictionary. com/definition/strategic-analysis. html. Last accessed 10th May 2013. Capon, C. (2008). Understanding Strategic Management, FT Prentice Hall. Gross, S. , Schroeder, A. (2007). Handbook of low cost airlines: strategies, business processes  and market environment. 1st ed. Berlin: Erich Schmidt Verlag. Henry A. E. (2011). 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