A combination of resources Essay Example

A combination of resources Essay Example A combination of resources Essay A combination of resources Essay Apart from legal political risks, Fly-Nice is also likely to face industry specific risks falling into four categories; hazard, financial, operational and strategic. 3 Many of these risks may be mitigated through creating a culture focused on the customer, developing a rigorous strategic planning process. Ways to solve the financial risks can be easy, mostly because of the third party involvements in this sector. The right design of financial transactions (for eg. Structured finance, insurance, debt/equity offerings) can be helpful in avoiding future problems. Operational risks can be lessened through organizational solutions, for example, process redesign, organization structural changes, seamless communication, contingency planning, performance measurement and resource allocation and pricing. A number of these challenges can be lessened in the first place through the selection of the business design itself. For example, Southwest Airlines is attractive to its customers because it is simple operationally and, therefore, cost effective. Other Southwest business design choices further lower risk exposure. For example, use of secondary airports insulates Southwest from direct competitive strain while improving turnaround speed. Low debt levels make the company less vulnerable to interest rate fluctuation. Also, along the dimensions of Porters Five Forces Theory, Fly-Nice would invariably meet the traditional challenges in entering a competitive market full of established players. Rivalry is also aggravated by the growth rates of the industry. While industry growth rates in European and North American countries are almost stagnant, there are emerging markets in Asia and South America where competition is intense. Also, airlines being a capital intensive industry, exit barriers are high resulting into excess capacity and consequently increased competitiveness. The power of buyers in a consumer oriented service industry is extraordinary. Customer expectations are high and if not satisfied results into loyalty switching. Innovation and customer satisfaction therefore is of utmost importance as products are almost non-differential making it easy for the customers to switch between competitors. In view of the risks involved, expansion of business is profitable only when the cost efficiency of operating the company is maintained. Maintaining and even improving cost efficiency requires an appropriate resource base and high cost management competency. Fly-Nice, in order to be consistently cost effective, must pay particular attention to the drivers of cost effectiveness or the cost drivers. Economies of scale: Since Fly-Nice is a service sector company, economies of scale are specially important in distribution and marketing. Also, use of the new Airbus with largest ever passenger carrying capacity will enable Fly-Nice to speed up turnaround rate. However, usage of a very high capacity aircraft also might push the company in the face of risks generating from empty seats. Supply costs: Expansion on a global level will require Fly-Nice to develop its supply chain network enormously. Purchase of aircrafts in bulk may be necessary, which may also give the company an option of negotiating for a bulk price. In-flight food and customer service equipments like pillows and crockery must be purchased in a way that retains the companys price advantage. Process design: Cost cutting in many cases comes through efficiency. Efficiency gains in production process can be gained through improvements in capacity-fill, labor productivity, yield from materials and working resources utilizations. In a service providing company like Fly-Nice, efficient management of capacity-fill is a key issue. So, marketing strategies like special offers, seasonal benefits and frequent flier programs and the possession of IT capability to optimize such efforts is a imperative. Experience: Although Fly-Nice is a successful domestic carrier, an international launching will invariable present it with a number of initial crises resulting from inexperience. Fly-Nices competitive advantage lies in its price competitiveness. To pursue its low price strategy, it must be ready to accept lower margins. Sustainable cost advantage can only be achieved through driving down cost throughout the value chain. Market segmentation and keeping the focus on the segment where price is valued over luxury is essential. Fly-Nice can also reduce their activity cost be outsourcing in areas where it is not very experienced. It must not fail to recognize the importance of consistently declining unit cost. In order to smoothen international entry and continual cost reduction, Fly-Nice may particularly consider strategic alliances with other international airlines. Alliances with either competitor airlines ( like using hub airports belonging to other airlines similar to Fly-Nice) or complementary service providers will lead to cost reduction and improved infrastructure. To enter global market, Fly-Nice will need local knowledge and expertise in order to satisfy the local customers. Alliances will assist the company in local marketing or distribution. Fly-Nice has an option of entering foreign markets by either joint ventures with other similar airlines or by direct foreign investment. Both options have their own advantage s and disadvantages. Joint ventures will allow Fly-Nice to lower their investment risk while increasing their know-how by a combination of resources. However choice of the right partners will prove to be of utmost importance should such strategy be followed. Joint ventures also often create problems in coordinating and integrating flight schedules across borders. On the other hand, if Fly-Nice decides to invest directly and create their own establishment overseas, it will incur enormous initial Investment cost. However full control of resources and capabilities will assist Fly-Nice in rapid market entry and in establishing their own brand image.