For this week's blog post, you will need to answer ONE of the questions about the Kiwi Air Case. (These questions will help you with this week’s mini-analysis. Try to give an original answer or angle, or pick an question/area that others have not chosen):
1. What features of the airline industry have affected KiwiAir’s competitive position?
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The problems and features within the airline industry's operating environment affect not only Kiwi Air, but all members of this industry, and are as follows:
ReplyDelete* Deregulation: when NZ airlines were deregulated in 1986 [1], barriers to entry were lowered to brand new entrants, and in the case of existing multinational lines, all but eliminated. This resulted in a price-war situation, with a range of carriers offering similar products to the same market segments.
* Rising costs: as pointed out in the case, rising fuel costs placed further pressure on Kiwi Air and other airlines operating within New Zealand and competing for market share.
* Giants vs. targeted offerings: The distributed nature of air travel means that while Kiwi Air also had to compete with other large companies offering similar products, it also had to compete on a regional basis with local carriers who, due to their ability to be more agile than their larger competition, were able to offer customers a greater flexibility, both in experience and price.
* Products: air travel, is, more or less a way to quickly get from point A to point B. This is the core product offering of all airlines, therefore competition is intense. There are not many areas where differentiation works for any extended length of time, and airlines can easily find themselves in a situation where they must continually invest in areas outside of their core expertise in order to retain market share.
The changes Kiwi Air made were not so remarkable for the information systems they implemented, but were remarkable for their forethought and vision for an organizational change that took place over many years. Kiwi Air took steps to not try and influence those factors which they could not change, such as intense competition and rising costs, instead choosing to focus on a targeted differentiation strategy - offering flexibility and convenience to customers with a scalable pricing structure.
References:
[1]: http://www.airways.ch/files/2008/0808/001/part1.htm#21
The features of the airline industry that have affected KiwiAir’s competitive position are:
ReplyDelete•The deregulation of the industry has resulted in an explosion of cut-price airlines that have competed with KiwiAir and taken away most of its market share.
•The fact that fuel has been overall increasing in price in the last 20 or so years but airline tickets have been getting cheaper due competition. Airlines have also constantly been improving their supply chains and saving money wherever possible.
•New cut-price airlines that are decidedly no frills that can easily undercut the prices of larger, more established airlines. Due to the size of New Zealand our domestic flying routes are very short so many customers do not have an issue with reduced in flight services if it brings about cheaper ticket prices. This is where the cut-price airlines have really done well and forced companies like KiwiAir to decide whether to become a cut-price airline or try to differentiate itself by providing exemplary service.
• After 9/11 there have been many issues confronting airlines including health scares, terrorism scares, and financial crises. This has resulted in airlines needing to be extremely flexible so they can deal with such a volatile market. Planes that are full one week, can be empty the next which means that airlines that have sound information systems that allow the airline to quickly and efficiently adapt to the conditions will survive.
I agree with the change in vision brought about by KiwiAir to have a long term change rather than just an immediate thrust of change for the organisation to come back after its downturn.
ReplyDeleteBut how long will these strategies last for until they have to invest in other long term technology to make a difference for their airline?
What happens if their system crashes and an unfortunate incidence of losing all customer information occurs?
There is a statement saying there is no paper trail at all. So if there is an instance of a system failure (which is likely) then that will be very disadvantageous, bringing them back to the same situation they were in before the changes implementation of CRM and ERP and other technology used such as RFID with their suppliers.
I know that the case does not have all this information, but just pointing out some errors in judgement they may have made in disregarding the paper trail altogether.