Strategic Planning in the Aviation Industry

Abstract

There is stiff competition among business organizations in the modern world because of the multiple options available to customers. There is less likelihood of a business taking a monopoly in any commercial industry.  As such, the organizations have to do more for them to compete effectively in the market. Any enterprise that needs to survive and achieve its objectives must establish itself strategically within the market. Otherwise, the business puts itself at risk of collapsing or not to attain the business goals in place. Therefore, strategic planning is a critical player in a corporation that aims at achieving a competitive advantage.

El-Hallaq et al. (2016) define strategic planning as the process of identifying and approving a business’s long-term goals and objectives, vision, and operation framework. According to Yıkıcı et al. (2018), the purpose of conducting strategic planning is to ensure the business overcomes and survives challenges. Common challenges in the industry are competition and fluctuation in market demands. Through strategic planning, an organization can achieve a competitive advantage in the market regardless of the number and state. Operations undertaken is strategic planning includes; (i) clarifying the vision of the business. In this stage, the management must define long-term goals and objectives. (ii) Collect adequate information concerning the industry in terms of what the industry requires, (iii) establish a strategy to use, (iv) Implement the plan, and (v) evaluate and manage the plan.

Keywords: aviation, strategic planning, competition, airlines, competitive advantage

1. Introduction

The airline industry is equally a competitive industry, just like other business sectors. An airline company purely deals with the transportation of people and light cargo by air. There are many airline companies globally, with each business trying to outdo the others, thus bringing competition. The stiff competition among airline service organizations calls for strategies to enable a company to survive (Albers et al., 2017). These businesses need to develop a long-term promising strategic plan that will be the basis of their operation. Any business’s success relies on the underlying strategic plan (Papke-Shields, and Boyer-Wright, 2017). It is in the program where the enterprise defines its goals and objectives. A company that has no objectives is likely to collapse. Generally, all organizations have plans and goals. However, not all programs are helpful to organizations. Therefore, a company needs to have a strategic plan and not just a project to achieve a competitive advantage. Most people think of competitive advantage as the ability of a company to dominate the market. This thought might not be right. A Company can have a competitive edge when its production cost is significantly lower than its competitors, even when the sales are at par (Rasouli et al., 2020).

1.1 Aim and Background of the research

With the ever-changing market demands and advances in technology, airline enterprises need to establish working strategies. These strategies are essential to help the business maximize profit while minimizing cost. The need to develop a clear and viable strategic plan for airline Companies forms this research. We have seen Companies collapsing or recording losses due to poor prior planning. On several occasions, business organizations end up spending more than what they earn; this is a big financial blow to any commercial organization. The author of this paper saw it relevant to conduct research that will provide a clear view of how aviation organizations should strategize their operations to remain relevant.

1.2 Motivation

Every airline enterprise aims at achieving its goals and objectives. However, not every company knows how to go about or what to do to accomplish its goals. Some organizations in other sectors such as tourism, manufacturing industries, freight forwarding, and telecommunication have succeeded in developing strategic plans that keep them live in the market ever since. However, most aviation industry businesses still face challenges when it comes to strategic alignment (Liao et al., 2017). There is a desire for aviation industries to borrow the techniques used in such enterprises. Successful implementation of strategic plans in other sectors motivates the author of this work to establish a working strategic plan for the aviation industry.

1.3 Research question and objectives

For this research to be productive, the researcher needed to develop research questions to be the project’s foundation. In this paper, the researcher established the following research questions; 1. What are the demands of airline Companies? 2. What roles do competitive strategies play in the industry? 3. What should airline businesses do to remain relevant in the market? This research aims to develop a comprehensive report that addresses operations in the airline industry, the impact of strategic planning in the industry, and measures to be done by airline firms to maintain their competitive position.

2. Literature Review

There are several strategies that companies use to achieve a competitive advantage. The method’s choice depends on the organization (Annarelli et al., 2020); this includes the size and the products it handles. It is also possible for an organization to use more than one strategy. Experts say that companies that employ two or more techniques have higher chances of surviving extreme conditions (Harris-Lovett et al., 2019). However, having many approaches is not a guarantee for success. Instead, success relies on the practical implementation of the plan (s). Companies fight for top positions in the market by making their customers see positivity in what the Company is aiming to achieve. The quality of products does not define the competitive part of an organization. Instead, the position is determined by the conditions the Company instills in its audience (Mazaraki et al., 2020). When a company makes its customers believe that its services and products are the best, we can say that the Company has achieved a competitive position. Airline companies gain competitive advantage by establishing an appealing environment for clients. Although the general purpose of aviation Companies is the same, airline companies try to be unique as much as possible.

The strategies to sustain an airline organization’s competitive advantage have to be flexible (Awale et al., 2016). Flexibility in the method enables the Company to adjust quickly and take advantage of new opportunities without looking for additional resources. Although there are many strategies that companies can implement, enterprises are advised to implement a plan that bases on providing a competitive advantage. A company with an excellent strategic framework can thrive in a competitive market. A good strategy is achieved through an in-depth analysis of factors that sustain a competitive advantage. Therefore, the management needs to understand these factors before deciding on which approach to use. Long-term plans aim at ensuring competence and customer satisfaction (Sundarakani et al., 2018). These two aspects are critical missions for any commercial organization.

3.  Analysis and Results

3.1 External environment

The external environment forces operations in an organization, but the organization does not directly control them (Abu Amuna et al., 2017). Examples of the external environment that impact airline companies’ operation are the local and global economy, unemployment, technology, legislation, demographics, governments in power, and societal values. These factors play a significant role in the survival of an organization. When setting up strategic plans for an airline company, it is essential to consider these factors

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The airline industry’s competitive nature calls for companies to implement more than one strategic plan to survive. An airline company that implements the appropriate strategies will enjoy being in the market for a long time. Companies with a brand name are more likely to thrive in the market than those that do not have. With the ever-changing market demands for airline services, each Company is trying to establish itself strategically to survive in the competitive market. Factors that give airline companies a competitive position in the market are affordability, uniqueness, and operation. China airline remains outstanding in the market because it implements a combination of these three strategies.

Affordability in business is the measure of prices and costs that are convenient to many customers. All commercial firms aim at maximizing profit while minimizing cost. High prices can bring considerable profit margins. However, a company can only enjoy the profits for a short period. People will always go for cheaper options when allowed to choose between a cheaper but good quality service and expensive service of the same quality. In airline businesses, people go for companies whose costs are affordable. Although a company might be charging slightly below the competitors, it will maintain its position as customers will always flood. It is better for a company to enjoy slightly lower profits per customer but still get full capacity than enjoy more from a few customers.

China airline implements the affordability technique to conquer its competitors by winning the majority of customers. There is a significant difference between China airline charges with other international airlines such as Qatar airline and Fly emirates. Low-prices enable the enterprise to gain most travel customers, primarily from the Asian continent, South America, and Africa. The majority of countries in these regions are developing. Thus, many people are not in a position to afford expensive travels. Through affordability, the Company counters the impact of unemployment in third world countries. Although many people in developing nations lack employment, low-charges in China airline make the Company gain a substantial number of clients. As a company, China airline adjusts its prices accordingly to match the state of the global economy. When the global economy drops, the Company maintains its customers by lowering the cost of travel.

An alternative strategy for airline companies to compete is by providing unique services to its clients. Many companies offer flight services globally. Therefore, it needs more than just having planes to compete in a demanding market. An airline organization must be unique from others for it to be outstanding. Uniqueness can come in the form of delivering parcels and light cargo, providing discounts for customers that book for the 10th time, among other privileges. A client that uses a particular company to send packages will use it to travel.

China airline provides unique services by accommodating all classes of passengers. For instance, the Company ferries all kinds of passengers with separate travel classes. The Company mainly uses big planes (airbuses) to transport passengers. Every flight has a casual level, economic class, business class, and first-class passengers. Casual class is the cheapest travel option for clients. The class mainly accommodates low-income earners.

On the other hand, first-class travel is the most expensive and is mainly used by tycoons or people who are well financially. Through these travel classes, China airline has obtained market from all levels of people. There are also extraordinary chambers for people with disabilities. Such customers are also charged differently from healthy people. This feature is specifically unique to China Airlines, and it has helped in branding the Company’s name. This ability gives the Company a broader market and brand. Thus, the Company competes despite the stiff competition. While some airline companies only deal with shipping people from one location to another, China airlines also serve by providing parcels and other light-weight cargoes.

The area of operation is a strategy for competitive advantage where every Company considers low-prices for customers. A strategic position is in terms of countries and regions where the Company operates. Some parts are more favorable for airline services than others. For example, areas that enjoy peace and political stability automatically yield more operation costs and customer travels. Likewise, there are more customers from regions with a high population than the sparse counterparts. Therefore, airline companies established in strategic places have a high chance of surviving competition and achieving their business goals. Areas that experience frequent wars and clashes are unappealing for settlement to most people. As a result, such places end up being sparsely populated. And in the end, there will be fewer potential travel clients.

China Airlines implements a positioning strategy that enables it to dominate the aviation industry. Most of the Company’s operations are in the African, South American, and Asian continents. These three continents are known to have the highest population globally. Through this population, the enterprise is sure to have a stable market for its services. There is a strong relationship between Africans and Asians in terms of business. Most people from Africa travel to Asia, especially the Middle East, China, and India, for business purposes. Equally, there are many entrepreneurs from the Asian continent that invest in the Caribbean and Africa. China airline takes advantage of the enormous travels to establish itself as a fully available airline company. Although several countries in the Middle East experience frequent wars (Iraq, Iran, and Afghanistan), China airline avoids operating in such areas. The Company also operates in countries with good diplomatic relations with China to prevent political quarrels that will hinder the Company from working peacefully.

4. Conclusion

The airline industry is a service industry that is very competitive on a global scale. The sector is responsible for providing airline services to customers. This paper provides information and explanations concerning the airline industry’s services and how a company can achieve a competitive advantage and its benefits. From this paper, we can see that the aviation industry’s services include hauling of passengers and light cargo and providing knowledge relating to air transport. Many aviation businesses bring stiff competition in the market as every organization tries to attain more customers. Companies that have to remain relevant in the market despite the competition must strategize appropriately through a strategic plan. Some of the critical points to consider when establishing strategic goals for airline enterprises are demographics, legislation, political stability, technology, unemployment, and the global economy.

A company that considers these aspects in its long-term strategy is likely to achieve its goal of serving many customers and increasing the profit-margin regardless of the state of competitors. External environments have a major influence on. However, a company does not have control over them. Enterprises can contain the impact of external environment by making the internal environment flexible enough to suit all clients.

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