KLM Strategic Analysis essay

They helped us with some difficult questions that we had and Furthermore, we would like to thank all the lecturers who helped us with developing this assignment by means of sutures about the different topics like Finance, Strategic Management, Economics, Marketing, Management Information Systems, Business Law & Ethics, Marketing and Organizational Behavior. List of Terms and Definitions In this report a couple of terms and abbreviations will be used. Beneath those terms and abbreviations will be explained. Term SF CARS KILL Definition Critical Success Factors Corporate Social Responsibility KILL Air-France Group 4 Table of Content List Of Terms and Definitions 5 Introduction Part A – Micro-environment AY Domain of the Company Market Shares _ Product Differentiation

Organizational Structure Macroeconomic Variables Part B – Remote and Industry-environment Trading Block(s) 82 Competition Characteristics 83 _ How the buyer is impacted How the supplier is impacted 85 How competitors are impacted 86 Possible new Competitors and Substitutes Part C – Strategy, Scenario Planning and Strategic Design Current Strategy Scenarios Competitive methods/Strategic choices Reflection on Analytical Models Conclusions and Recommendations References Appendices Appendix I ? Profile of KILL Appendix II – PESTLE (extensive version) Appendix Ill – 5 forces of Porter Objective of the assignment 6

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The aim of this report is to get a comprehensive understanding of KILL as well as the whole aviation industry. This includes looking at competitors, suppliers and customers. Potential competitors and substitutes are also analyzed along with identifying the industry wide Critical Success Factors. Furthermore, scenario planning will be developed and the current strategy and new strategies will be formulated based on the analysis of the internal and external environment. 7 KILL Royal Dutch Airlines was founded on 7 October, 191 9 to serve the Netherlands and its colonies. KILL is today the oldest airline still operating ender its original name.

KILL has been part of the Air France – KILL since the merger in 2004. KILL is the core of the KILL, which further includes the wholly-owned subsidiaries KILL Stethoscope, transit. Com and Martina. For the complete profile of KILL, please have a look at Appendix l, on page… Since it is nearly impossible to give numbers for the worldwide market share of Air France – KILL, figures from Lufthansa, British Airways and Air France KILL will be analyses and compared. These three airlines are comparable competitors, since they operate in the same market and offer the same services and quality.

Comparing Air France – KILL to, for example, Ryan, would not give a realistic view, as Ryan is a budget airline and therefore, they do not operate in the same market. Market shares are calculated by the revenue or passenger per airline dividing by the total revenue or passenger in aviation industry. The outcome is the percentage share per airline. Revenue and passenger numbers are found in the annual reports from the airlines, total aviation industry numbers are found in news articles (Quest, 2013 and CIAO, 2012).

As can be seen in the tables above, Air France – KILL is the second biggest airline in Europe, when compared to comparable airlines, looking at the revenues and passengers transported. Meaning, cargo and other services are not included in the calculations. 8 Product Different taxation Figure X perceptual Map ?? Perceptual mapping is used by companies to get insight on how a company can distinguished themselves compared to their competitors. This technique outlines a “Mental Map” (figure X) of how their product or service is perceived by customers.

In the Perceptual map of the airline industry there are only two of the four segments which are currently applicable in the market being: low price & low laity and high price & high quality. In the current society it is not possible for airlines to offer cheap tickets with higher quality simply because the development of aircrafts is high of and investment. The airline industry can be categorized as a Monopolistic Competition (Chapter 82) were airlines can distinguish themselves from their competitors via product differentiation. According Wendell R.

Smith’s article in The Journal of Marketing Product differentiation is defined as followed: “a strategy viewpoint, product differentiation is securing a measure of control over the demand for a product by advertising or rumoring difference between a product and the products of competing sellers” (Smith, 1956). To Even though the products serve a similar purpose they differ or are perceived to differ. There are several ways for companies to achieve this through diversification on; quality, style, convenience, geographical, and brand image (Flat World Knowledge, 2015).

One should consider that under monopolistic competition, regardless of their customer loyalty, if a price reaches over a curtained amount the company will lose its customers to their competitors. This means airlines have only lamented control over their prices (Flat World Knowledge, 2015). In this part an analysis of the organizational structure based on proper theoretical frameworks is provided. Organizational structuring is a method for companies, which answers the questions of how they resolve needed coordination and division of labor (Integer, 1979).

The elements of organizational structuring suggest five basic configurations, also called; structure in fives: Simple structure, Machine Bureaucracy, Professional Bureaucracy, Devotionals Form and Autocracy. Management of KILL From May 2004, KILL and Air France Royal Dutch Airlines have become the biggest European airline group: one group, two airlines and three businesses. Both companies keep their own identity, trade name and brand. The three core businesses are: Passenger Business, Cargo and Engineering & Maintenance.

KILL and Air France develop their own activities from the hubs; Amsterdam-Siphon and Paris-Charles De Gaulle. The management of KILL is conducted by the Executive Committee (Come). There, the statutory board and the executive vice presidents of the respective business units are represented. Besides the President-director and the Financial-director, the respective business units represented are; Operations, Cargo, Commercial, Engineering & Maintenance, MR. (Marketing, Revenue Management and Network), Infilling Services, Flight Operations, Information Services and Human Resources & Industrial Relations. KILL has an independent Supervisory Board. They are responsible of the supervision of the company and the Executive Board. Airline KILL is part of, just as partner Air France, the AIR GRANGE KILL S. A. The management of AIR FRANCE KILL is conducted by the Group Executive Committee (GEE), which aims on group related subject such as; strategy, finance, commerce, technique, information technology, purchase- and fleet development The GEE has 11 members and determines the direction and strategy Of AIR

FRANCE KILL and guards this. 5 parts of an organization Integer discusses that there are basically 5 parts of an organization Deconstructed : consists of those analysts, out of the direct structure, who apply analytic techniques to the design and maintenance of the structure and processes to the adoption of the organization to its environment (For KILL: CARS, Corporate Control, Finance, etc. ).

Support staff : includes those groups that provide indirect support to the rest of the organization (For KILL: CIO/IS and HER & IR which includes; Real Estate and Facility Contracting & FAKE Liaison Office). Operating core includes all those employees who themselves produce the basic products and services of the organization, or directly support their production (For KILL: Hub operations, flight operations etc. ). Strategic apex : consists of the top general managers of the organization, and their personal staff (For KILL: the KILL Executive Com tithe). 0 Middle line : comprises those managers who sit in a direct line of formal authority between the people of the strategic apex and of the operating core (For KILL: Commerce, Cargo, MR., etc. ). Organizational chart KILL The organizational chart of KILL is to found below, the red and green circles in his document have no purpose. When looking at the organizational structure of KIM, a clear techno structure on the left side of the chart can be found. Moreover, a clear support staff on the right side of the chart is also visible.

Furthermore, the power tends to be centralized vertically at the strategic apex (at the top). Vertical decentralization refers to the extent to which formal decision making power is delegated down to the chain of line authority. Horizontal decentralization refers to the extent to which power flows informally outside this chain of line authority (that is, to analysts, support taffeta, and operators in the operating core. That the power is tending to be at the top is made clear in the information about the management of KILL.

Decision making is done by upper management, the Executive Committee, the Supervisory Board, etc. However, in this organizational chart some power also lies in the techno structure, looking at the department Strategy & Corporate development. Meaning, there is also power horizontally – Limited Horizontal decentralization. When combining all these characteristics and looking at the five structures of Integer, Slum’s structure is a Machine Bureaucracy.

Integers definition of such a structure goes as followed: 11 The Machine Bureaucracy coordinates primarily by the imposition of work standards from the deconstructed; jobs are highly specialized and formalized, units functional and very large (at the operating level), power centralized vertically at the strategic apex with limited horizontal decentralization to the deconstructed; this structure tends to be found in simple, stable environments, and is often associated with older, larger organizations, sometimes externally controlled, and mass production technical systems.

To conclude, KILL is a company which power lies mainly at the top, with some haft of power to the deconstructed. Slum’s structure can be seen as a Machine Bureaucracy. Looking at current macroeconomic variables and Slum’s strategy, it is likely that the current economic crisis has a significant influence on KILL. Recent economic figures show a recovery in the Kick’s economy. According to The Treasury (2015) “it is clear that the foundations for a sustainable recovery are being laid. ” Auk’s economy grew by 2. 6 percent in 2014, investments grew with 6. Percent and even though import increased by 1. 3 percent, an export growth of 3. 5 percent outpaced this. (Monogram, 2015) When looking at vents in the past, it is likely that the European mainland will follow the Auk’s situation. The tables below show GAP development between 2006 and 2012 and KILL financial figures and passenger transportation figures between 2006 and 2012. In the first graphic, the development is shown and the relationship between the GAP and Slum’s results is visualized. As can be seen, Slum’s results over the years fluctuate, but not as much as the GAP does.

From the graphic can be concluded that GAP growth, and therefore economic circumstances, do not have major impact on the revenue and passenger amounts of KILL, but is does have an influence on the profit. Remarkable if the fact that KILL profit reacts fairly late to economic changes. As can be seen, GAP decreased by 4. 5% in 2009, however, Slum’s profit decreased more in 201 0 than it did in 2009. 12 (Rheostat, 2014) (SKI_M, 2014) Approach to managing economy Before analyzing which approach Europe has to managing economy, the two styles, Keynesian and new classical approach, will be explained.

A similarity between the two approaches is that both are made up of government spending, business investment and consumer spending. (Vitae, 2009) In the new classical approach, government spending is subordinate to consumer and business spending. It is believed that economic growth is mainly influenced by consumer spending and business investments. Moreover, too much government spending will remove economic resources necessary for consumers and businesses. Main focus in the classical approach is long-term solutions. (Vitae, 2009) Contrary to the new classical approach, Keynesian economics is driven by government spending.

Keynesian economics believe government spending will encourage customers and businesses to spend and invest. Moreover, according to the Keynesian theory, government spending improves or even replace economic growth, when there is almost no consumer spending or equines investment (Vitae, 2009). To analyses which approach the EX. has, the GAP composition development in the EX. of different years has been analyses. The graphics below show the development in GAP composition between 2003 and 2013, with 2005 as starting year with index 100.

As can be seen, since the start of the economic crisis in Europe end 2008 (Europe Nu, 2014), final consumption expenditure of general government and final consumption expenditure have stayed at the same level. Even though the consumption expenditure of the government is higher than general consumption expenditure, it is hard to draw conclusions about the economic approach of the ELL High government consumption expenditure is a characteristic of the Keynesian approach, however, since the start of the economic crisis the expenditure has not increased. Therefore, drawing conclusions on the economic approach of the EX. infeasible. 3 AY An Article of European Journal of business management identifies seven Cuff’s of the airline industry being: Culture: A culture is a set values, assumption and ways of acting which is accepted and followed by the employees. These values and attributes are embedded into the processes which will reflect into the final products and can be felt by the customers. With and effective culture in place and the commitment of personnel and airline can create perceived value by customers and even reflect on the financial statement ( Bun and Mass, 1998).

Customers get a sense of the organizational culture through front-line interaction which forms the image of a company (Buddha, et al. , 2013). The KILL calls themselves the “Big Blue Family/’ (KILL Royal Dutch Airlines, 2012). And strives towards a clear embodiment of these values. KILL tries to implement this via different approaches but in terms of SF the customer perceived value can be argued one of the most important drivers. A good example is the staff of and airline.

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