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Airline Simulation Questions

Brief 1: Evaluating whether a deliberate, strategic formulation approach or an emergent formation approach to strategy is more suitable to the undertaking of the Simulation Game

The prescriptive approach views strategy development as a deterministic and systematic process where analysis of a corporation, its external environments and performance leads to the creation of long term and rational plan. Top management is responsible for defining the final plan and objectives. Techniques that feed this process include Value Chain Analysis, Porte’s five forces models.  These models analyses the industry and the existing capabilities and serve as a concrete basis for competitive advantage.  The emergent approach states that strategies can be unplanned and developed incrementally as the organization adapt to the changing environment. Application of both prescriptive and emergent approach in luxury and standard airline is critical in the planning of the airlines.  An emergent approach helps luxury airline to suit to the unpredictable and hyper competitive environments as the company does tie its self solely to goals, mission and the predetermined plan. Prescriptive approach enables standard airlines to manage the complexities of its business operations during changing circumstances. Standard airline intended plan is to offer charter flights that will link Manhattan’s East side Seaport (NES) with Hamptons Martha’s Vineyard, Nantucket, Hamptons and other gross grained destinations.  Standard airlines aim at providing its services to members of the proletariat and its hotel guests.  The competitive threat facing standard airline is the significant threat of Middle Eastern airlines such as Dubai’s Emirates, Qatar Airways, and Etihad of Abu Dhabi Airway. SMR Walsh the chairman of the association of European Airlines explains that Middle Eastern airlines are a worrying factor in Europe and US (Clark, 2010). Strategies to retain the competitive advantage of standard airlines include prohibiting countries where Airbus and Boeing are built form offering export credit agency guarantees to local airlines.

Brief 2: Applying Porter’s 5 Forces Model (Barrier to Entry) in Understanding Standard Airline Performance

Porters’ explain that when the barriers to entry are low the company’s threat to new entrants in the market increases and vice versa (Daft, 2009). According to Porter, barriers to market penetration include investment cost, economies of scale that are available to existing firms, regulatory and legal restrictions, product differentiation and, distributions channels,  access to supplies, and retaliation to the established products (Daft,  2009). Companies enjoying economy of scale are able to provide quality and cheap services that hider new entrance in the market.  Increasing investment costs include high interest rates, government restrictions and high prices of raw materials. In and effort to control competition from the Middle Eastern Airlines in the U.S and Europe market, there is  the need to avoid financing the competitor by imposing restrictions to capital.  Threat to the new entrance and aviation looming competitions has led to financial injustices in U.S and Northern European Airline. The bargaining power of the clients influences standard airline air tickets. Based on the destination of the freight, the company operates fixed rates; but, at some point forced to lower the cost by the demand in the market.  Bargaining power of the supplier in this case supplier of Standards aircrafts and fuels determine the company’s profits margin margins.  When the fuel prices are high, standards airlines register low profits that affect its daily operations.  Where the company is limited to the no of the supplier of its aircrafts, the top management spends huge money as the dictated prices are usually high.  The threats of substitute for standard airline in US include Middle Eastern Airlines and China airlines that offer quality services at affordable rates.  Apart from Middle Eastern airline, other major rival to standard airlines include budget airlines, luxury airline and China airlines.

Brief 3: Identify, according to Porter’s ‘Generic Strategies’ the chosen strategic ‘position’ of Standard airlines

Porter’s generic strategies explain that an organization must decide whether to focus on gaining competitive advantage by lowering cost than its competitors or differentiate its services or products and sell the products at a premium price (Daft, 2009). Beside, the firm must strategize on whether to target the entire market or a niche market.  A niche market consist of a small number of segments while a broad market is characterized by desperate cross section of consumers and large market.  In this case, it is impossible for standard airline to adopt the cost leadership strategy following its high level of competition in the market.  The best strategy for standard airline would be differentiation by offering different products with a different delivery system. In order for the corporation to achieve competitive advantage, differentiation strategy will enable the company to win huge market share by providing unique features valued to the clients. Unique features and services would include hiring cabin crews with  good communication skills and able to speak in different languages.  Highly skilled cabin crews and freight attendants are able to address clients’ concerns in a friendly manner.  In US, standard airlines operate in Arizona, Texas, California Phoenix, Tucson, and Los Angeles. Its freight services to various states makes it possible to offer differentiated services and products to a wider market coverage.

Brief 4: extent has your airline employed a ‘Resource Based

View’ approach in attempting to gain a competitive advantage within your Industry?

According to resource based approach, in order for the firm to enter and sell its services and products in the international market, it must have a certain level of competitiveness (Henry, 2008).   This competitiveness resides in the company’s intangible resources.  The company’s resource base such as technological capacity, process innovation, and patents rights influence the company’s decisions. Patent rights enable the organization to reap benefit for a certain time flame before other firm can access the same product and services. Innovation is an essential asset that allows the company to provide up recent products that suit consumer tastes.  Following the minimal environmental power of internal resource constraint and owner centered culture of standard airlines, it is imperative to develop the critical, analytical skills to sustain the growth of the company.  Human resource is a fundamental resource to Standard airlines as it helps in identifying the successful candidates to serve as engineers and pilots in this sector.  In order to retain its employees, the company adopts an efficient Hr strategy that harmonizes employees’ salaries. Remuneration of employees determines the ability of the company to provide quality services to its esteemed client across America.  In order to improve and gain competitive advantage, standard airlines’ HR should develop training and development programs that equip its employees with skills.  The company’s valuable, rare, and imitable resource include professional employees and reliable aircrafts that make standard airline outstanding in the market.

Brief 5: Whether First Mover Advantages effective in the Simulation game when entering new markets, or can success accrue to airlines who are ‘Fast Followers’?

Advantage of first mover that is firmly embedded in business is that first movers that fall by the wayside are forgotten (Jopson, 2012).  Another advantage of first mover is the law that provides movers with the right to register new brand and patents.  In the world of business, there is a notion that first is best, which leads to tremendous romance around the initiative of pioneering and breakthrough.  The disadvantage of first mover is the high risks and costs involved while trying to develop new products. (Jopson, 2012).  First movers must engage in research and development activities to weigh the viability of different market segments. Analyzing a market segment require comprehensive research work and regular surveys.  First movers face the challenge of educating customers on the newly developed commodities and services through advertisement and promotions.  Customers often assume that the products that advertise loudest are the one that hit the targeted market first. Example of first mover is P&G a company that specializes on detergent products. (Jopson, 2012).   The company had to incur advertisement costs in order to woo its targeted consumers being the first movers. Other companies that provided stiff competition in this sector include Church $ Dwight, and U.S Henkel.  Benefits of first follower in this case Henkel and Church and Dwight were enjoying from informed consumers that demanded less advertisement costs for the same products.  In this scenario, Standard airlines can best benefit by being a fast follower in newly established markets.  Being a fast follower, the company will be able to avoid challenges facing first movers and advertisement costs.

References
Clark, P., 2010.  BA chief warns of threat from Mideast airlines.Retrieved from http://www.ft.com/cms/s/0/7f078f56-c0f6-11df-99c4-00144feab49a.html#axzz28yMaeYjm

Daft, R. L., 2009. Organization Theory and Design. California: Cengage Learning.

Henry, A., 2008. Understanding Strategic Management. Oxford: Oxford University.

Jopson, B., 2012. The first-mover advantage myth. Retrieved from>http://www.ft.com/intl/cms/s/0/6c65423a-63c5-11e1-8762-00144feabdc0.html

Smart Company. 2012. Low cost airlines brace for price wars. Retrieved from http://www.nation.co.ke/Features/smartcompany/Low+cost+airlines+brace+for+price+wars/-/1226/1527630/-/15jk6vpz/-/index.html

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