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To examine the principles of strategy and change management and provide learners with a critical understanding and ability to use various models of the strategy and change management process and the analysis of internal external environmental and resource variables.

Using a variety of tools to critically analyse internal and external business environment: internal organisational environment e g. definition, types, features and changes; internal management analysis; employee and management review; efficient communication rationale; strength analysis; weaknesses analysis; resource analysis; pricing strategies; strategic drift; product analysis; product life cycle analysis;

Aims

In today’s world, low cost carrier airlines become a trend, therefore the airline industry applied of strategies to grow into the market. Airline industry is chosen for this particular report to analyze the strategic plan of the organization, Azul Brazilian Airlines. It provides with passenger as well as cargo air transport services within Brazil. The airline organization provides of air transportation services with connecting cities in Brazil. The company is founded in the year 2008 with fleet size of 144. Azul Brazilian Airlines is the third largest airline within the country. The airline industry utilizes of technology in order to reduce the cost and propose of better service with superior expediency to passengers.

The report analyses the organizational strategic plans, strategic options, creates an implementation plan for the organization, analyses the principle processes of the organizational changes and implementation of the strategic plans. Both internal in addition to external business environment are also analyzed for implementation of the strategic plans of the airline industry. This particular report also analyzed the internal and external business environment using strategic models and tools. Different change management models are also analyzed to implement of changes into the organization using Koter’s 8 step change model.

Analyze the position of the organization in current market

Market situation analysis

Azul Brazilian Airlines is the third largest airline within Brazil. With the purchase of “63 airbus group NV (AIR) A320neo jets”, Azul is being poised in order to operate their largest planes on the domestic routes. The airline organization is going to offer 3000 more seats than other foremost airlines. Currently, the airline organization has largest airline network in terms of cities served, with service more than 100 destinations as well as 792 daily flights.

Items

2012

2013

2014

2015

2016

Passengers transported

12 million

20 million

21 million

22 million

24 million

Aircraft into services

118

133

138

138

139

Destinations

100

103

105

106

107

Market share

15%

17%

17%

18%

19%


Table 1: Key drivers of continuous growth of Azul Brazilian Airlines

(Source: )

Using this strategic business planning tool, it analyzes the external factors of the organization consists of decline into passenger traffic, increase into operational expenses, higher price of fuel and greater maintenance cost. Following are the factors of Porter’s five force analysis:

Supplier power: There is vast supplier power within the airline industry based on three inputs such as fuel and labor. Those are affected by the external environment. The price of fuel leads to fluctuations into global marketplace of airline. Labor is also subjective to power as sometimes unions bargain and gets unfair and expensive allowances from the airline organization.

Buyer power: It is moderate. With the process of online ticketing, the filers are no longer dependent on agents for booking of tickets. Entry of the low cost carrier also benefited the fliers. The buyers are engaged into price discovery means there is fluctuations into price as they are various channels through which the passenger can book their tickets.

Entry and exit barriers: It is high. The airline industry, Azul requires huge capital investment in order to enter into airline industry and make a competitive advantage. The organization requires higher infusion of capital and sophisticated expertise to compete into the Brazilian marketplace.

Threat of substitutes: It is at moderate level. With use of train, bus, car people can travel from one state to another. The switching cost is low for those transport channels as compared to airline. The people may not switch to other transportation system as the airline provides of free Wi-Fi, passenger amenities provided by full service. They are also induced to minimum fare.

Task

Threats of competitive rivalry: It is high. Azul is competitive airline organization as the barriers to entry are low cost carrier and tight regulation of the industry. The industry is regulated to supply side as compared to demand side.   

Both internal and external business environment is analyzed for determining the effects of the existing plans on Azul Brazilian Airlines. External business environment of the airline industry is analyzed using PESTLE analysis whereas internal business environment is analyzed using SWOT analysis.

SWOT analysis of the Azul Brazilian Airlines provides with strategic report of the airline organization with operations and position of the organization into current market of Brazil.

Strengths

Weaknesses

· Azul Brazilian Airlines has skilled workforce

· Higher profitability and revenue

· There is higher growth rate of the airline industry

· The airline organization is focused on future cost and income structure

· Higher competitors

Opportunities

Threats

· New technological trends increase the market share

· The new and innovative technologies are obtainable at realistic costs

· Expansion of network operations into Europe, US and South America

· There is  changing demand of new products along with technologies

· There is change in price

Due to various factors, Azul Brazilian Airlines consist of higher operating cost, lower profit and decrease into margin. PESTLE analysis is a strategic management tool used to analyze the external and current state of the airline industry.

Factors

Description

Political factor

The political environment of the airline industry is highly regulated and it favored the passengers over the airlines. Azul Brazilian Airlines operated into such an environment where the safety of passengers is at higher priority. Brazil ranked 72nd out of 180 countries in case of corruption.  

Economic factor

The potential growth of Brazil is high. Prolonged recession, fluctuations into the price of oil and global slowdown are the factors which affect the growth of airline industry.

Social factor

The passengers are become more demanding; therefore their demands are changing day-by-day. There is change into profile of passengers where there being more economical minded.

Technological factor

The airline industry adopted of latest technology to compete into the market. It will result into lower the consumption of fuel, cost of airline operations with improved into efficiency.

Legal factor

Lawsuits against the airline industry are gone up. It is due to intolerant of the delays and safety issues.

Environmental factor

With change into the climate, the passengers are counting of the carbon footprint which is a higher environmental factor. Therefore, Arul Brazilian Airlines is forced to adopt of green flying due to concerns of the environments. It will stop emission of carbon.

Critically discuss the relationship between corporate, business and operational strategies 

Strategic management activities of the airline industry are taken place at three levels such as corporate, business and operational. These three levels affect impacts of the activities at each phase of the company’s operations. At top of the corporate level, there is board of director and chief executive officer. They have responsibility towards financial performance of Azul Brazilian Airlines like enhancement of the image of the airline industry and fulfill social responsibilities. In the middle, there is business level which consists of business as well as corporate manager. Business strategic managers conclude how the airline industry participates into chosen product market field. At bottom of the hierarchy, there is operational level which consisted of managers for the product and operational areas. The selected airline industry develops of short term strategies into production, research, development, finance, marketing along with human resources areas.

Azul Brazilian Airlines has benchmark into the airline industry for their excellence of operational strategies. The organization provides efficient business operations to drive their low cost structure, outstanding of the delivery of customer’s service along with innovative practices of HR management. The airline organization managed to implement of innovative technologies while maintaining reputation into the market. The strategies used to keep the operational cost low are flying from point to point routes, carrying of the reliable aircraft, and maintenance of the higher utilization of aircraft as well as encouragement of the e-ticketing. Airline carriers such as Azul Brazilian Airlines consists of cost advantage over the network due to generation of more workforces generate of more output per employee. The productivity of the business becomes higher due to longer length of flight and larger average size of aircraft into network carriers.

The purpose of this study is to investigate the causes behind diversification of the airline business of Azul Brazilian Airlines. This report discusses the strategies used by the airline industry which help to strengthen the position of the company into the marketplace. Ansoff matrix model is used for developing the strategic options for the airline organization.

Ansoff matrix includes of the following four conditions such as:

Market penetration: With use of Ansoff’s matrix, it provides strategic direction for the development the airline organization. Market penetration defines an increment into sales along with profit into the existing market by means of acquisition as well as low ticket fare. As it is done by acquisition, it achieves of lower cost, consolidation of the existing routes and increasing of the market share.

Critically review organizational strategic plans

Market development: This strategic model suggested that the existing products are sold to new marketplace in order to improve the growth of airline industry. Azul Brazilian Airlines introduces of new routes to Europe, America and others. They provide of diversified services to their passengers by launching of loyalty card as a medium to draw more customers to fly.

Product development: It is the process to examine the importance of new products for the current airline industry market like online ticketing. It consists of development of new product for providing comfortable journey to the passengers. Development of the product also consists of global expansion as well as secondary airports. Azul Brazilian Airlines provides free flights, development of IT to promote of online ticketing and use of new planes to increase ability of the airline carriers.

Diversification: Using this business strategy, the airline organization improves both productivity as well as profitability by introduction of new products into the marketplace. In order to compete into the airline market, the company should collaborate with other airline industry to provide of connecting flights in various cities. Connecting flights increase frequency of the customers which is beneficial for the company. Ansoff matrix provides of strategies to make a diversified based on competitive advantage such as enhancement of the innovative sources, cost differentiation, increase of the market share and change of the rules. It is also achieved by means of long haul routes.

According to (), following are important strategic options evaluated for Azul Brazilian Airlines such as:

  1. Growth as well as diversification of the market is limited to business which generate of synergy. It pertains to create of economics of scale among two or more products. It lowers the cost of the services by lowering of operational cost.
  2. Corporate strategies are based on exploit of core competencies across various products. There is strong customer base to sell of the products.
  3. Successful growth strategies are based on portfolio of products and services that fit with the managerial style. The airline industry promotes of triple bottom line for promotion of green images.
  4. Merger is a key importance strategic option consists of shared ownership and used to determine what the merging company provides with diversification to acquire new customers and products.
  5. There is electronic development into sales as well as check in services, printing of the boarding cards, tagging of the bags and others. Through use of electronic sales and self services, the airline cut the cost on sales as well as checks in personnel. It is efficient for the customers as less time required in queue at the airport for check in.

Create appropriate vision, mission and strategic goals for Azul Brazilian Airlines

Vision of Azul Brazilian Airlines:

  • To make travel more easy in addition to economical

Mission of Azul Brazilian Airlines:

  • To derive of “Passenger Revenue Per Available Seat Kilometer (PRASK)” premium from network
  • To optimize of fleet, higher operational efficiency with higher quality of offering of airline services
  • Focus on customers, generate of crewmember and serve benefits to communities

Strategic goals of Azul Brazilian Airlines:

  1. To become largest airline network in Brazil
  2. To implement an efficient cost structure into the Brazilian airline marketplace
  3. High quality of customer experiences throughout product as well as service focused culture
  4. To add of new destinations, larger aircraft and increase into frequencies of flight
  5. To have experienced team of management

Azul Brazilian Airlines consists of matrix organizational structure based on their market and organizational functions. The organizational structure is based on size of airline. Following are the stakeholders involved into the airline organization:

Stakeholders

Responsibilities

Board of Director

· Evaluate entire direction and strategy of the airline business

· Recruit, evaluate and supervise the managers

· Provider of direction to the organization

· Establishment of organizational policies

Chief executive officer

· Oversee the operations of the airline industry

· Review airline and flight operations

· Oversee implementation of the organization’s long and short term strategic plans

·  Assessing risks of the airline organization

· Ensure on internal control along with management information system

Human resource officer

· Recruit, train and develop the staffs

· Approval of job descriptions 

· Provide benefit and rewards to the staffs

· Monitoring of performance of staffs and their attendance

Financial officer

· Making sure that governmental resources are managed properly

· Keep record of the daily transactions

· Prepare of the balance sheet

· Processing of the invoices

· Participation into financial audits

Accounting and financial controller

· Documentation of accounting allocations

· Performing of cash management functions

· Oversee of the accounts payable, receivable and payroll functions

Front line Manager

· Maintain and control over the daily operations

· Recruit and hire of expertise to work into airline industry

· Providing of training and support to the new people

· Communicate and understand the functional goals

· Identification of the requirements for accurate actions

Technical officer

· Plan and manage of airline activities like information technology development

· Schedule maintenance and repair of the airline equipments

· Inspect of the airline business functions to ensure that it is safe and supervise electrical contractor’s work

Technical development and IT officer

· To address of technical problems and provide solutions

· Install of the computer operating system

· Monitor and maintain the IT system

· Support roll out of the new applications

Flight operation officer

· Involve into daily running of airline’s operations control centre

· Deal with issues affect the airline business

· Monitor the airline by making sure that it runs on time

· Plan to reduce disruptions into flight programme

· Arrange of aircrafts to undergo the maintenance

Cabin crew

· On board welcoming the passengers and direct them towards their seat

· Making of announcements on behalf of pilot

· Ensuring that the passengers follow safety procedures in case of emergency

· Carrying pre-flight duties like security check, check the safety equipments

Ground manager

· Checking for the passengers in for the flight

· Re-route and re-book the passengers those are delayed

· Provide up to date information on flights

· Assist the passengers by providing proper enquiries

· Assist the staffs to do security check

In case of Azul Brazilian Airlines, the key important points for proposed strategies are the following with implications of resources:

  1. There should be a superior workflow process to provide better airline services and products to the passengers.
  2. There should be a reward program to include resources to behave as per interest of the organization.
  3. There should be a communication process to interact with each other, helps in exchange of information and values.
  4. There must be evaluation process help to define value for people, activities and allocate them to the required levels.
  5. There must be identification process to develop significance of the airline industry. Emotionally toned symbols are used for this purpose.

The key components of the strategic plan includes of the following implications of resources:

Human and capital requirements: In order to implement the strategies along with potential sources, both human capacity as well as skills is needed. Requirement of human capacity are internal system, engaged partners and supportive legal framework.

Financial requirements: In order to implement proposed strategies, funds are required.

Assessment of risk: At first the risks are identified, then for respective risks mitigation strategies are implemented.

Estimation of the lifespan and sustainability: There is estimation of how long the implemented strategies are stand and ensured for sustainability of the achievements of the organizational objectives.

Apply force field analysis to analyze and identify forces of change

Following are the factors which are identified from the force field analysis and forced to make changes:

Stiff competition: The airline industry, Azul Brazilian Airlines faces stiff competition into the market due to their competitors such as LATAM airlines and GOL. On the short haul routes, the organization faces vital competition into ground as well as in air.

Porter’s five force analysis

Increase in fuel price: There is a sharp increase into price of the fuel leads to higher price of the airline tickets. The result is that Azul Brazilian Airlines has tough competition from the lower cost carrier airlines which offer with discounted rates to their passengers.

Degradation into quality of the services: There is huge reduction into the quality of services provided by the airline organization. Due to lack of punctuality of the staffs, it affects the reputation of the organization. The result is that it has slapped with series of fines with new laws as well as regulations concern the airline industry.

Therefore, the reasons to change are competition, rise in fuel price and lack of quality of airline services.

Lewin change management model and Kotter’s 8 step change model are significant change management strategies for managing the changes into the airline industry of 21st century.

Lewin change management model: There are three phases of this model such as unfreeze, movement and refreeze. The first stage unfreeze, the leader diminishes power of people. Under second state movement, Lewin believed that new attitudes are developed among people, where people are finding for new ways to do their work throughout new direction. The third stage refreeze, which consists of new behavior providing by support. In this particular stage, criticism is a challenge for the leaders in order to freeze the behaviors when continuous changes are required.

Kotter’s 8 Step Change Model: Using this change management model, it is claimed that there is changes into recession into competitiveness, share of the market and also financial performance. The organizational vision is also created to meet with its organizational goals. Lack of vision of the organization is resulted into irrelevant plans, confused staffs which lead to incompatible of the activities. The vision of the airline industry is developed using communication channel.

Effective leadership skills are required to manage people into the organization such that people can implement of strategic changes. The skills required are formulated and communicated the strategy, management of people alignment, alignment of decisions as well as actions. The strategic leaders motivate the airline employees to become more productive by providing of reward as well as incentive system. They have potential to foresee with the work of airline business environment. The main skills required into the leader are loyalty, motivational skills to achieve organizational goals, self control and self-awareness. A change agent consists of two main skills diagnostic and behavioural skills. The agent can identify the challenges and then define it. There is acquiring of skills throughout formal training and experimentation. They have good communication skills to make the changes. They also have good goal setting as well as planning skills to set of goals for the organization to make a commitment to see the strategic plan.

Analyze the time schedule for the implementation of strategic plans 

Activities

Duration

Implementation of strategic plan for Azul Brazalian Airline

100 days

   Review of the organizational strategic plan

19 days

      Perform a situation analysis of the airline industry

2 days

      Analyzing the internal and external business environment

14 days

         Analyzing the internal business environment using SWOT

5 days

         Analyzing the external business environment using PESTLE

9 days

      Analyzing the effects of the existing strategic plans of the airline industry

3 days

   Propose of strategic options for the airline organization

16 days

      Discussing relationship between corporate, business and optional strategies

4 days

      Apply strategic models and tools to develop strategic options for an organization

5 days

      Evaluate strategic options for the airline industry

7 days

   Strategic implementation plan of the airline industry

30 days

      Identify the vision, mission and strategic goals

9 days

      Propose of structure for the airline industry to fit into strategic plan

12 days

      Resource strategy implementation plan

9 days

   Critically analyze the principal processes of organizational change

16 days

      Apply force field analysis to analyze and identify forces of change

3 days

      Critically evaluate various change management models

8 days

      Apply leadership and change agent skills to implement a strategic change in an organization

5 days

   Evaluate the implementation of strategic plans

19 days

      Design key success indicators in order to monitor the implementation of the strategic plan

10 days

      Analyze potential risks during implementation

9 days

The key success indicators are required within the airline industry to monitor of the implementation of strategic plan so as to achieve of organizational mission, goals and objectives. The top level management considers of following indicators during setting of organizational goals such as:

Analyze the effects of existing plans on organization

Strong management: There should be a strong management for the airline industry so that they can control the increase of cost which makes their travel plan difficult to do. The management also motivates the worker to work properly and meets with organizational goals.

Capable workforce: There should be high qualified along with competence workforces is a key significant requirement for the airline industry to perform the airline operations. They also have strong communication skills to interact with the customers. Staffs are required to be highly paid so that they even cannot leave the organization.

  In-flight services: The promotion within the organization is also enhanced the base of the loyal customers and they are focused on regular higher revenue of the customers. In-flight services are provided to the customers such as comfortable seating place, class for offerings of service and proper business plan. Simple service is a critical success factors for the selected airline organization.

Financial management: The airline industry should regular proper investment into their airline business so that they can plan a proper cost structure. There should be proper accountability of unit revenues in order to compute profitability that is calculated by the revenue minus the expenses which is divided by total seats flown.

Proper route system: The route of the airline organization is most reliable so that the organization can perform their business functions properly and efficiently. The fly and frequency of the flight is also a success factor which increases the demand of the passengers to use their services for fly in tour and business plan.

Following are some of the risks which are identified during implementation of strategic plan for Azul Brazilian Airlines such as:  

High competition: The airline industry such as Azul Brazilian Airlines is highly competitive; therefore they are not successful to compete into the airline marketplace. Therefore, the result is that business, financial conditions as well as operating results are affected the business operations of the selected airline organization. At the time of implementation of strategic plan for the organization, the airline industry faces competition into the market due to routes and high fares. The revenue is affected due to growth of low cost carrier into Brazil. However, due to expansion of low cost carrier, it affects the hub airports of the Azul airlines business.

Reduction in cost structure: The business of selected airline industry is highly based on accessing the capital market. The credit ratings of the organization are lowered and therefore they achieve lower cost structure. At the time of implementation of the strategic plan, high cost is required and when they have low cost structure, they are not able to access to the capital market for new borrowing. It results into hinder of their ability to function into the business.

High cost of fuel: The airline organization is highly dependent on availability as well as price of the airline’s fuel. When there is higher cost of fuel, it disrupts the supply of the fuel and affects the operating result of the organization. Due to stiff competition into the airline industry, high price of fuel results into increasing the fare price of the passengers. Therefore, impact of low aircraft price of fuel offsets by raising the competition of price, which results into revenue reduction for the air carriers. Change into governmental policies also affects the fuel production.

Internal business environment- SWOT analysis

Conclusion

It is concluded that due to raise into the price of fuel, it affects the marketplace of the airline industry. There is high competition of the airline industry due to growth of low cost carrier which provides their customers good service with low cost of fare. A huge capital investment is also required to compete into the market. Therefore, Azul Brazilian Airlines decide to implement of strategic plan to make a competitive advantage. The switching cost is low for those transport channels as compared to airline. From the SWOT analysis, it is analyzed that the airline organization has higher revenue and growth rate but they have high competitors too. Apart from this, the organization implement of technological system such as baggage checking, online ticketing to increase market share. The selected airline industry makes their travel easier into economical. They have also derived of PRASK premium. The organization should make some changes into their business functions by using of change management model. They should be preparing a communication plan to cooperate with each other and facilitate in exchange of information and values. In order to make changes, the management decided to merge their business with other airline business for raising frequency of the customers.

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