For most of the last fifteen years, the U.S. airline industry has been one of the least attractive to be in. Following the 1978 deregulation of the industry, twenty-nine new airlines entered the industry between 1978 and 1993- This rapid increase in air line carrying capacity led to a situation of overcapacity. As more and more airlines chased passengers, fares were driven down to levels barely sufficient to maintain the prof itability of U.S. airlines. Indeed, twice since 1978 the indus try has been engulfed in an intense price war–first in the1981-1983 period and then again in the 1990-1993 period. So intense did the com petition become during these two periods that in 1982 the whole industry lost $700 million, while in the 1990-1992 period the industry lost a staggering $7.1 billion, more than had been made during the previous fifty-year history of the industry. Despite the obviously hostile nature Continue reading
Strategic Management
Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. It involves the systematic identification of specifying the firm’s objectives, nurturing policies and strategies to achieve these objectives, and acquiring and making available these resources to implement the policies and strategies to achieve the firm’s objectives. Strategic management, therefore, integrates the activities of the various functional sectors of a business, such as marketing, sales, production etc. , to achieve organizational goals. It is generally the highest level of managerial activity, usually initiate by the board of directors and executed by the firm’s Chief Executive Officer (CEO) and executive team.
Political Environmental Scanning
Business firms, like people, are touched directly and indirectly by political/legal influences at all levels of government (central, state, and local). These influences run the alphabetic gamut from antitrust to zoning. The scale of central intervention in business is matched only by its turbulence. In addition to serving as regulatory bodies, governments also represent a major factor in the private sector through fiscal policy. Taxation and government spending can represent both opportunities and threats, depending upon the nature, timing, and position of the impacted enterprise. And, of course, fiscal policy can have dramatic impacts on the overall economic climate of the firm. Shareholders are affected by government interventions in a variety of ways. Changes in tax structures can affect tax exposure on corporate payouts when treatments of capital recovery versus earnings distributions are considered. To the extent that corporations themselves are shareholders, inter-corporate shareholding can be can affect the “tradability” Continue reading
Process Benchmarking – Definition and Steps Involved
Benchmarking involves comparison of one firm’s processes with that of other firm while reengineering is concerned with redesign of operational processes. Benchmarking involves thorough research into the best practices followed by other organisations in the industry where the company operates and it helps in breaking down the organisations’ activities down to process operations and modifies them to the best-in-class for a particular operation. The word benchmarking has been derived from the set of activities used by cobblers to mark the size of the foot of their customers. For measuring the size of the foot they used to ask the customer to put their foot on the “bench” so that they can “mark” the foot using a pen. In Benchmarking processes of one company are compared with the processes of the industry leader to see the practices and the ways in which these industry leaders operate and to modify their own Continue reading
Strategic Importance of Mission Statements
Mission statement is the description of an organization’s reasons for existence, its fundamental purpose. It is the guiding principle that drives the processes of goal and action plan formulation, “a pervasive, although general, expression of the philosophical objectives of the enterprise.” Mission should focus on long-range economic potentials, attitudes toward customers, product and service quality, employee relations, and attitudes toward owners. “A mission statement is an enduring statement of purpose for an organization that identifies the scope of its operations in product and market terms, and reflects its values and priorities…..Every company no matter how big or small, needs a mission statement as a source of direction, a kind of compass, that lets its employees, its customer, and even its stockholders know what it stands for and where its headed.” – Abrahams, 1995. From the above definition its clear that Mission statement is an enduring statement of a firm’s purpose, Continue reading
Downsizing – A Corporate Restructuring Strategy
Downsizing or layoff is a widespread strategic decision and change practice since 1970’s and during the economic downturn in the year 2016 it became a more common phenomenon. Changing patterns in reasons cited for job loss support this impression of the rising importance of restructurings. Differences in factors such as the state of the economy and the signal sent by job loss could make the process of downsizing and the effects of job loss differ between restructurings of healthy organizations and downsizing due to financial distress. Downsizing Approaches There are many kind of approaches in downsizing. The reasons for the firm to undertake such approaches also varies. They include restructuring, closing or selling of a business unit, cost reduction, cost savings, increased productivity through greater efficiency and effectiveness and coping with external pressure including recessions and economic downturn, economical change, increased competitive pressures through greater globalization of business and technological Continue reading
McKinsey’s 7S Model – A Great Strategic Management Tool
The McKinsey’s 7S Model was created by the consulting company McKinsey and Company in the early 1980s and subsequently has become the de facto standard used by practitioners and academics alike in analysing the performance of an organization. The McKinsey’s 7S model is a value based management (VBM) model that describes how one can holistically and effectively organize a company and together, these factors determine the way a company operates. There are seven variables in the model which include structure, strategy, systems, skills, style, staff and shared values. All beginning with ‘s’, justifying why it was termed as the 7S model. These seven variables can be classified as soft components and hard components. Strategy, structure and system were hard components which are usually feasible and easy to identify because they are usually in the policy statements, business plans, organizational charts, organizational structures and systems as recorded in the report. The 7S Continue reading