Essay, Pages 4 (983 words)
The above product and marketing plan helped Continental in building customer confidence in the airline and winning back customers who was disappointed by the services given before Bethune and become top airline company in customer satisfaction Continental also structured individual efforts into teams and work groups in order to facilitate an exchange of ideas and foster a climate of support. They allow employees to participate in making decisions about how to perform their jobs, and they try to make jobs interesting and satisfying.
While financial incentives (salary increased, performance bonuses, stock bonuses, retirement packages etc. ) are the core component of Continental to empower employees, it is recommended for Continental also to make extensive use of no monetary incentives as jobs promotion, opportunities to transfer to attractive locations. The financial plan helped Continental in securing positive cash flow and developing effective financial information system that helped in decision making. Continental needs also to strengthen its international and domestic alliances to be able to pay its loans within short time.
From the above “go forward plan” the strategy was in solving the problem from its root not quick fix or band-aid. It starts from building employee morale to winning back customers from other competitors.
Bowman’s clock Continental is also following broad differentiations strategy, trying to differentiate the services from the rivals by offering value added services to customers charging to medium to high prices. The strategy clock= Bowman’s Strategy option High Perceived Value added Low Low price medium price high price In many cases company efforts to achieve differentiation usually raise costs.
The trick to profitable differentiation is either to keep the costs of achieving differentiation below the price premium the differentiation attributes can command in the marketplace (thus increasing the profit margin per unit sold) or to offset thinner profit margins with enough added volume to increase total profits. It is recommended for Continental airlines to incorporate extra differentiation features that are not costly but add to buyer satisfaction.
Outside- in strategy (stretch strategy)
The strategy concentrates on providing what the customers need, thus they produce and supply according to the demand of the market. Bethune was open for all ideas of both employees and customers to hear their views and what they wanted, and this lead to improved services and customer care. 8. Implementation and execution of the Go Forward Plan Continental Airlines Financial & Operating Performance The implementation and execution of the Go Forward Plan for Continental Airlines can easily be explained by the financial and operating performance as follows:
The operating performance of Continental Airlines before 2000 was improving at an increasing rate from year to year. However as the operating statistics in table 3 shows, it declined surprisingly in the year 2001- e. g. Revenue passengers declined by 5.7%, passenger load factor declined by 2.8% in 2001 etc. when compared with that of 2000. In conclusion the financial & operating performance of Continental Airlines has dropped from its satisfactory position in 2000 and the previous years, to its lowest level in September 30, 2001.
The weak position in 2001
This weak position in 2001 could be blamed to the sluggish US and world economy and the terrorist attack in USA, during September 11, 2001. 9. Evaluation of the Turnaround Strategy, “is it fragile or not? ” Immediately after the 9/11, Gordon Bethune announced that the company would reduce its long-term flight schedule by about 20%. He also announced that the company would furlough about 20% of its workforce. These are the steps taken by almost all airlines in the US. Some companies like Southwest didn’t cut their workforce because of their no layoff policy.
Some others like the US Airways where both the pilot and flight attendants were unionised were unable to furlough because there was no furlough clause in their contracts. In order to contain costs and detour the need for planes to accommodate prior flight schedules, many airlines responded with immediate announcements of schedule cutbacks. Our financial analysis above shows that the net income of Continental was improving year after year at an increasing rate until 2000. It slowed down in the year 2000, which is attributable to the sluggish, US and world economies.
Other indicators like revenue passengers and passenger load factor have shown incremental growth until 9/11. This was all a result of the turnaround strategy. Following our analysis, we can say that the action of Gordon was the right decision and we are not surprised. They are the actions taken by most airlines. The crisis is not a result of bad strategy or lack of execution. The causes of the crisis are external factors such as the sluggish US and world economy, and the terrorist attack. This resulted in a sudden downturn in passenger traffic.
This in turn caused massive losses for the company. The above given facts justify that the turnaround strategy was not based on a shaky ground. The US airlines industry was in a big crisis following the 9/11 attack as passengers lost confidence. To recover from such a crisis and build confidence, the different airlines followed different strategies that match their specific company situations. Southwest, despite the schedule cutbacks in the three days immediately after the attack, was able to recover its full schedule by September 17,2001. It elected to make no cutbacks of any kind.
It is a matter of policy
Initially the company was following the focused low-cost strategy, while Continental was following broad differentiation strategy. Before the 9/11 crises, the only two American airlines making a profit were Southwest and Continental. The former still continues to be profitable, although by a narrow margin and the latter is the one that loss the least out of all the large airlines. Being heavily burdened by debt, continental’s strategy may not fully sustain the crisis. As discussed below, additional adjustments are necessary to make it sustainable.