Manufacturing Development Strategies in Aviation Industry- Sample

Questions: Critically assess the contemporary commercial challenges for airline or airport management from the perspective of leadership and global competition in different country settings. Critically evaluate the management challenges resulting from product and service innovations for airlines and airports in a global setting. Critically assess the corporate planning process for airlines and airports for long term profitability. Critically evaluate the business planning cycle for short term profit targets for airlines and airports. Critically appraise financial statements such as balance sheets, financial ratios, etc. and evaluate how theses statements and ratios are used in evaluating the financial health of a company. Critical evaluation of financial plans and long-term business viability via the identification of various sources of finance. Answers: Introduction Ethiopian Airlines are the flag carrier of Ethiopia. It is wholly owned by the government of Ethiopia. It started its operations from the year 1946 (Adamski 2012). It expanded to international flights in the year 1951. This airline is a member of the International Air Transport Association and African Airlines Association. The headquarter of this airlines is located at Bole International Airport. It is in the capital of Ethiopia, Addis Ababa. From here, it serves as many as 82 passenger destinations of which 19 are domestic and 23 freighter (Amankwah-Amoah and Debrah 2012). Ethiopian airlines fly to many locations in Africa. It is much more than any other airlines. It is one of the most profitable airlines in the region of Sub-Sahara. The Economist featured these airlines as an example of excellence in the year 1987. It was named as the most profitable airlines in Africa in the year 2010 by Air Transport World. Therefore, it is obvious that this airline is a very prominent and growin g airline in the world. Market Overview Market overview represents the general market share and growth potentiality of a company. The Ethiopian airlines comprise as many as 83 international destinations and 20 domestic destinations. It includes 49 cities of Africa, 13 in America and Europe and 21 in Asia and the Middle East. The division of cargo serves 24 locations, which includes 15 in Africa, 2 in Europe and seven in the Middle (Eas Crespo et al. 2012). As a part of the company policy, apart from the main activities, this airline also earns revenue from maintenance service to aircraft of foreign airlines and specialized training to both foreign and Ethiopian trainees. In the year 2005, this airline adopted a vision named vision 2010'. It targeted to increase passenger traffic to around 3 million and revenue to the US $ 1 billion. By 2010, these airlines achieved far all the objectives that were set in vision 2010. In 2010, the airlines adopted another vision named vision 2025'. It targeted a strategy of development for 15 years. Under this vision, the airlines target to increase its fleet to around 120, destination number to 90, carrying 18 million passengers (De Neufville 2015). In the year 2010, Ethiopian Airlines signed a deal for acquiring 49% of Air Malawi, which is a Malawian carrier. The government of Malawi would own the remaining shareholdings. Impact of changes in regulations and operational environment within the region Various changes in the operational environment and regulations affect an airline company. Ethiopian airlines are no exception to this. The general condition of African continent is not so well during recent times. The continent is clouded with poverty, civil and political unrest (Dinges 2012). These factors are strong enough to affect the operations of Ethiopian Airlines. The social and political environment in which it exists would affect any corporation. The unstable social, political, and economic environment of Africa have adversely affected many airlines in the continent of Africa. However, Ethiopian Airlines were an exception. These factors did affect the performance of the airlines, but the overall growth potentiality and revenue-earning capacity of the airlines were not hampered. In spite of various regulation changes by the government and various adverse social and economic factors of the environment, this airline continued to expand its operations an earn good amount of rev enue (Ellison and Stafford 2014). There are some factors for this. They are discussed as follows: The most important reason is perhaps that this airline has one of the most dedicated and exceptionally committed workforces in entire Africa. This is obviously a huge advantage for the airlines. The employees of this airline do not simply regard themselves as just an employee under an employment contract with the company. They very much consider themselves as an integral part of the entire family of Ethiopian Airlines. They consider themselves as a part of the mission and vision of the corporation. This is indeed a very exceptional advantage to any corporation (Gssling and Peeters 2015). The policy of the airline is very effective. This is more so about cost leadership. The corporation is very strict in the aspect of cost leadership. The company aimed at a lowest possible cost per unit while delivering services that meets the global standards. This has given the corporation an advantage regarding flexibility of pricing. Next reason for the growth of the airlines despite unfavorable operational regulations is that the policies and strategies of this airline are all on the long-term basis. The 15-year strategy is a very prominent example of this fact. Determination of long-term strategy has helped the organization to survive the adverse changes in regulation and operational environment (Helmreich 2012). Another very important reason for the success and survival of this airline can be attributed to the corporate governance of the organization. The management and ownership of those airlines are completely separate and distinct which has given this organization an excellent advantage. Top line opportunities and challenges There are many regulations and operational changes recently in Africa. The overall economic and social situation is not conducive for growth of business. The changes have affected most of the businesses and large corporations in Africa. It had an effect on Ethiopian airlines also. These changes created many opportunities and challenges for this airline (Rodrigues and Cusick 2012) These are explained below. Opportunities The first major opportunity that cropped up because of changes was that those changes adversely affected the competitor organizations. The competitor organizations were affected primarily due to the changes in government regulations and general economic depression. As a result, their growth and revenue decreased. This was a major advantage to Ethiopian Airlines. The organization took advantage of this fact, and it earned much more revenue than other major competitors like Kenyan Airways. This was largely due the good corporate governance and strategy of the management of Ethiopian Airlines (Sheehan 2013). Government regulations also helped the organization expand its operations to other countries of other continents. For example, the company announced recently that they wanted to expand their reach to Latin American countries and some countries of Asia. However, the conformation dates were yet to be announced by the airlines. Additional revenue opportunities cropped up due to some of the regulation changes made by the government. The government allowed training to foreign airlines company. Because of this, Ethiopian Airlines started to give training and aircraft maintenance facilities to both airlines of different African countries and domestic airlines of Ethiopia. This increased the revenue of the company largely. This change of regulation obviously proved to be an advantage for the organization (Weckman et al. 2014). Lufthansa Airways are the largest airlines in entire Europe. This company provided mentorship service to the Ethiopian Airlines. This was a major opportunity for the airlines as it received mentorship service from such a large airlines company of Europe. It would provide various strategic advantages to the Ethiopian Airlines. Challenges The major challenge increased in the aviation fuel cost. The economic depression in Africa led to the increase in the fuel cost in Ethiopia due to government financial policy. The increase in fuel cost means a major increase in cost per unit. This can affect the cost leadership policy of the organization (Merkert and Morrell 2012). The African aviation industry is large and growing rapidly. It is also very lucrative. This has prompted many foreign airlines company to open their operations in this continent. Most of these airlines are very powerful and can capture the African market. This is posing a great challenge to Ethiopian Airlines. The government policy to improve roads and railway infrastructure can lead to a decrease in the number of airline customers. Potential Scenario for the next 1 to 5 years reflecting the competitive landscape As mentioned earlier, African aviation industry is large and growing. There are many big players in this industry in Africa, both domestic and foreign. The lucrative African industry for aviation is also attracting much other large aviation company from foreign continents. These can prove to be a very tough competition for Ethiopian Airlines shortly (Wensveen 2015). The major competitors of this organization are Air France, Egypt Air Holding Company and Kenya Airways Limited. They can provide a more severe competition in future. Ethiopian airlines have recently started receiving mentorship services from Lufthansa Airways. This is a good advantage for the organization. This can prove to be a critical factor in surviving the future competition and gaining the upper hand. The tough competition can pose as a big challenge for the organization in the future. Tough competition would require the company to decrease the price of its service. However, it can prove to be difficult in a situation where aviation fuel price is rising. This is indeed a challenging situation for the organization in the future scenario. The recent rise and growth of Emirates and Qatar Airways are threatening the future scenario for Ethiopian Airlines. These two airline companies are growing rapidly and looking to establish a strong foothold in the African continent. Both of these companies have a strong financial position and good customer base (Sheehan 2013). From the above discussion, it is evident that the future holds a tough competition scenario for Ethiopian Airlines. Key recommendations for survival and growth of Ethiopian airlines in future It is evident from the previous discussions that this organization is facing some immediate challenges and some threats for the near future. Tough competition is a major factor among the challenges and threats. The increase in fuel price due to government policy and environmental challenges such as social unrest are adding to the list of threats for the future scenario for this airline. Some recommendations can be given to the company for helping it to survive and grow in the challenging environment of the future. These recommendations are given below: The corporate governance of the organization is efficient and strong, as discussed earlier. However, it can be improved further. If the management can be made more muscular, then the company has a strong chance of eliminating the competition of the future. Flexibility should be added to the management and governance. The element of flexibility is very crucial for surviving the uncertain environment of the future. The company can incorporate some experience members of management of reputed global airlines (Sheehan 2013). Those experienced management personnel have already faced tough situations in the past. They are experienced enough to handle these types of difficult situations. That is why it is required to incorporate such management personnel from other competitor airlines in the organization. This can also give to the organization various insights about the competitors and their strategies. The company must aim to maintain their role of cost leadership. They must try cost reduction as much as possible so that they can decrease the price of services offered by them. It is utmost essential in this competitive environment (Ellison and Stafford 2014) Alliance with one or more of their competitor can also prove to be fruitful. Alliance with the other main competitors can increase the revenue and eliminate unwanted competition. Many companies have gained the advantage from alliances and mergers. Management of Ethiopian airlines can consider this strategy. The company can also use sound future forecasting techniques that can help them analyze the future and act appropriately beforehand. Conclusion In conclusion, it can be said that Ethiopian Airlines is a leading airline in Africa, and one of the popular airlines of the world. It has various positive aspects, and the company is growing rapidly and expanding its operations to various foreign countries. However, it also faces some challenges due changes in environmental, operational and government regulation of the region. 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