Business Studies Case Study on Strategic Analysis of United Airline

Executive Summary

The United Airline passenger airline firm has been performing very well to the extent of earning billions of dollars annually in recent year. It has kept a track record as one of the best performing business firm in the US despite the present challenges it is experiencing. After deregulation the business has remained cyclical in terms of pricing pressures and excessive capacity periods. In the past years the business is experiencing continued growth in terms of size and also income and at the same time enjoying good profit margins. As a result of current fuel increase and high skilled labor requirement the profits are slowly diminishing. The report is aimed at addressing the present challenges facing the industry and coming up with a strategic plans to address this issues and proposing on what should be done to solve these  challenges. The airline had to come out and fight to protect its reputation in the US market after the ‘United breaks guitars’ incident. This report analyses the strategic situation of United Airline using the SWOT analysis model. This report accesses the current situation of the company and the tactful and strategic measures that have been put in place. Numerous challenges face the overall aviation industry while others are specifically those facing United Airline. The challenges include; poor customer relation, poor financial strategies, fluctuating global fuel prices, competition, market and customer demand among others.

Strategic Analysis of United Airline

 

Introduction

United Airline is a company with its headquarters in Chicago. It offers air transport for both passenger and cargo. It controls Way over 270 air crafts and makes approximately 3000 flights a day. US is the greatest markets providing for over 80% of the company’s customers, The company faces huge challenge in maintaining is position locally and internationally. Among the challenges are;

Inadequate labor-There is shortage of technical labor at United Airlines and the general aviation industry. Recruitment of both skilled and semiskilled labor is a growing problem. This problem has made the company to outsource provision of technical skills to vendors. Due to this the air carrier is supposed to consider having a graduate training programs and offer scholarships so as to face out the challenge of labor. The relationship between the airline and unions which represents pilots, flight attendants and mechanics is mistrusted. Passing of collective bargaining agreement reduced the profit margins by increasing the wage bill.

Technology – United airline is experiencing challenges in distribution and technology because travel is a system based on information and it is subject to technological changes. Social media leads to fast passing of information which may be an advantage to the firm but also a setback if the information is malicious.

Infrastructure – there is infrastructural challenges due to already congested airport as a result of air traffic control system being antiquated. Expansion of airports and more flight companies getting into business implies existing resources are getting strained. Bigger airplanes are being invented but they cannot land in some airports due to constrain caused by inadequate infrastructure. Rescheduling if flights and changing of flight route is becoming a challenge.

The united airline continues to experience public scrutiny. There is need for strategies responses to be to be formulated putting into consideration rapid changes which may result in or collapse strong economic growth (Yu G. 2002).

 

Assessment of Current Situaion and Strategig Analysis

United Airline is face with a number of challenges that need to be streamlined to ensure the airline remains competitive. Strategies to ensure that the airline quickly adapt to the ever changing bussiness environment must be review from time to time. The company has a fleet of ovre 271 planes and over three thousand fleets per day making it more a leader in service production. Previous experinces like the’United breaks guitars’ have given a new look to the overall outlook of the company. Having fought hard to recover from the negative publicity, it has risen to become a world leader. Intrduction of paperless flight was a atep in th right direction replacing the manual paper work. It is currently a hub to various destinations.

 

United Airlines SWOT Analysis

Strengths:

This is the unique attributes that the company has that give it a better competing advantage over other companies. The strengths must always be analyzed and understood well so as to remain ahead of competitor. The unique extra ordinary services or perception that the company offers is what builds up the company. This is an advantage and strength to the company.

  1. United Airline is strategically located. Its location in the United States and other nation is one of the greatest strengths of the airline. United Airlines has strategically positioned itself as a hub and spoke company. It has secured locations in some of the greatest airports including Chicago, San Francisco, Washington and Denver from where they offer direct flight to various international destination including Europe, China, Kuwait and Australia. This is a strength that the airline has over the other flight companies. Table below shows United Airlines Hubs and their performance:

 

Rank Airport Flights Destinations
1 Chicago–O’Hare, Illinois 530 182
2 Houston–Intercontinental, Texas 496 177
3 Newark, New Jersey 397 161
4 Denver, Colorado 372 137
5 San Francisco, California 275 99
6 Washington-Dulles, Virginia 215 102
7 Los Angeles, California 139 56
8 Guam 30 22
9 Tokyo–Narita, Japan 18 11

Table 1

 

  1. United Airline has a strong operational frame work. United has been in existence for a long period of time. It is a brand name that is not new to clients in the flight industry. Due to its long presence it operates more than 3000 flights per day. This is a huge number of flights. The US being the biggest market for United’s flights. It has way over three hundred destinations worldwide. This provides a bigger customer area with diverse needs and attention. This makes United Airlines a global household name in the flight industry.
  2. United Airlines has developed strategic alliances with other firms over time. This has helped to increase its competitiveness and easy penetration into world and local markets. Star alliance has been of great importance to United Airline. It has greatly benefited in ticketing process, coordination of flight reservations, Baggage and customer handling and scheduling of flight.
  3. Relatively high productivity of employees is another enormous strength. It has over forty six thousand employees worldwide with majority being in US.

Weaknesses

These are the loop hole that exist and threatens the existence of the firm. Weakness in handling of customer matters and financial decisions can cause a challenge to a firm and even cause its collapse. United Airline is faced with a number of challenges that are of very great concern, this include;

  1. Poor customer relation and slow response to their concern. ‘United Breaks guitars’ is an indication of poor customer relation. This may be translated to mean that the company has poor customer relation. The situation was poorly handle with no professionalism. The management brushed off the issue and treated it as an everyday affair that has no impact in the company’s reputation. The speed at which the customers concerns are handled is engineered to frustrate them to withdraw their complaints. This is a very poor strategy.
  2. Weakening financial performance. United has constantly resisted loss for the last ten years. Since the start of economic regression that threatened the collapse of the economy, United Airline is yet to recover. Its long term stock is lower that industries average which indicates poor financial management strategies.
  3. When United Airlines was declared bankrupt in 2008, it created a difficult financial situation that is negatively impacting on the company. It has stained the company’s credit rating. Customer confidence has significantly reduced and financial institutions are cautious in dealing with United’s activities making it difficult to obtain financial assistance. This is an indication of insufficient control in cost management.
  4. United is dependent on third party service providers. Most of the important activities are being outsource from other vendors, Customer care services, maintenance and repair or aircraft and fuelling of the aircrafts are just but a few to mention. Outsourcing implies that United Airline get into a contract agreement with vendors but they do not have direct control over them. This offers a challenge in dictating some important and urgent measures that may arise.

 

Opportunities

This is any future trend in the industry that present an avenue for growth if it is exploited. When an opportunity is sported and exploited at the correct time it will bring about great growth in the company. The following are some of the opportunities that United Airlines should exploit,

  1. The constant growth of United States of America growing airline industry. The US airline industry in constantly growing with more people shifting to air travels.US is the biggest market for United Airline providing for over 80 percent of its customers. This is a great opportunity taking into consideration that united is a household name in aviation in the United States. The figure below shows the growth of united Airline in comparison to economic growth of U.S.

Figure 1.

 

  1. Increase in global travels and rise in tourism worldwide. Increase global travels provided an opportunity for more flight and opening of new markets. Unexploited and less competitive markets. Increase in number of destinations and number of flights is likely to occur. This will lead to growth if it is exploited early enough.
  2. Current and projected economic growth. After the economic regression the recovery has been slow but promising, some states have recovered fair enough while others are slowly catching up. Growth on the world economy offers a big chance for growth.

Threats

These are future challenges that are likely to cause decline in growth of an industry (Yu, 2002). The threats should be addressed in time and companies need to prepare adequately to handle the challenges. Relevant and working strategies should be put in place to ensure that the firm is secure against the challenge and preventive measures put in place to handle the situation suppose it occurs. Among the threats facing United Airlines are;

  1. The stiff competition in the market and discounting of prices from competitors leading to price war is a threat to the industry. Prices need to be adjusted every time to become competitive. The intense competition is greatly ailing the industry and losses may be witnessed due to lowering of prices.
  2. Future prices of fuel. The global fuel prices have been fluctuating making it difficult to predict the expected cost in future. Aviation industry greatly depend on fuel to enhance it operation. Any slight increase in prices of fuel leads to an increase in expense due to the volumes of fuel used.

 

Strategic and tactical strategies

Due to the dynamics of the aviation industry, constant reviewing of strategies and tactics of operation are inevitable. United Airline has made various steps to remain competitive and widen its territories. The method which will be utilized to achieve the recommended solution of united airline includes the following

Alliances and consolidation- this is the grouping of many Airlines into alliances of different types aimed at producing specific set of benefits. This has made it possible for United Airline to explore a number of routes in the underserved parts of the United States. The star alliance has been of help in enabling penetration into world destinations that would have been difficult to penetrate. The alliance also helps in saving costs to members due to shared terminal facilities. This enables tactical entrance into the markets and government protection.

Microbial fuel – with the unpredictable fuel prices, United Airlines is investing in microbial derived biofuel. This is fuel that is generated from decomposition of substances due to action of microorganisms. It made a milestone and became the first aviation company to fly a microbial derived biofuel plane.

Markets and customer demand – United airline has made great strides in formulating strategies that create approaches of attracting and retaining the customers where by continued flier programs have been introduced. This program enables onetime customer information about United Airline services.

Financial operation – United airline is aiming at cutting costs and maximizing profits. Hedging fuel cost is one of the strategies put in place to maximize on profit.

Intelligent, progressiveness and aggressiveness of marketing should be considered since it identifies the united airline as different business from others. This action will ensure attainment of recommended actions. The first step involves redefining of the goals, objectives, mission and vision of the company.

United airline has integrated technology into their operations therefore enabling ease access to information by clients. Replacement of the manual entry of data where papers were used has been replaced by use of electronic media. All United pilots do not walk with papers anymore. The use of improved or advanced technology to relay information electronically reduces staffing and operating cost therefore expanding the base of operational cost.

Establishment of quality controls and high levels of operation to ensure the united airline offers the best services ever to the customer for them to be satisfied. Customer care representative have been trained and motivated to deal and relate with clients in friendly manner (Edwards, 2013. Customers concern is addressed with haste and diligence. This is the transformation that works towards the slogan of united airlines. High quality services will maintain the position of United as a leader in flight services and give it an advantage over its competitors. United airline has to speedily analyze and implement the following measures;

Competition problem – to tackle stiff competition from other flight service providers, united airline has to come with new policies and programs aimed at increasing its competitive advantage. It should strategize in maximizing profits and cutting down costs i.e. the operating costs. The firm has to introduce more alliances to synergize market strategies. This plays a big role for the industry when it comes to marketing of the company services. United airline should be very careful in avoiding some of the challenges associated with issue of globalization and consolidation that comes with merging. Merging can lead to unfavorable business environment when there is no transparency. Adequate analysis is required before a merge is agreed upon (Edwards, 2013). The united airline has to take creative approaches of attracting and maintaining the customers. It has tried to come up with travel point programs to an extent of being involved in internet shopping. For the airline to keep large numbers of passengers, it has to continue coming with up with these programs. The united airline has made an effort of introducing flight movies and first class sections in the flights. There is also creation of entertainment services to customers on their flights and this attracts more passengers. Creation of the business class between the coach and first class bring comfort to those who are travelling.

Since there are enough markets demand and continued growth in airline services which allows large number of airlines to compete effectively the business has to find ways of cutting down the cost in order to boost profits thus ensuring effectiveness in financial operations. The airline should take a move in hedging fuel costs for effective management of cost. This help in ensuring profit margins are maintained even during situations of price wars.

Distribution and technology- United airline should be fast and aggressive in responding to changes so as to get benefits of the evolving new technologies. The new technologies contribute to cost saving of the industry. Therefore the airline should be in fore front of innovation to come up with new technological program in order to boost in cost saving.

The united airline has to participate in regulations and promoting of public interests, clear framework should be developed to deal with antitrust and malicious activities that will taint the image of the company. Public awareness should be practiced by the industry for the improvement of traffic infrastructure thus avoiding congestion. This will reduce congestion challenges during flights. .

Conclusion

In conclusion the united airline industry has passed through different kinds of changes. The changes are due forces such as technology and growth of United States economy. These changes bring challenges to the industry of which it has to adopt the changes. The participant of the industry has to initiate change for the benefit of overcoming the challenges.  The formation of alliances has contributed to increased load factors. The industry has to continue forming alliances to ensure that the travellers are well catered in terms of the fare and comfort on their flight.

The new technologies in the United States airline have created new avenues through which tickets are issued and this has led to efficiencies and instances of saving cost for the industry. Despite the avenues it creates, technology has to solve air traffic challenges by improving management of traffic systems and capabilities of weather forecasting

 

References

Edwards, J. (2013). Advantages And Disadvantages Of Competing In International Markets. 1

  1. Canada.

In Belobaba P., In Odoni, A. R., & In Barnhart, C. (2016). The global airline industry.

Yu, G. (2002). Operations research in the airline industry. Boston, MA: Kluwer

Academic Publishers.