Air Nations Case Study
In 1998, Air National turned as a newly privatised company that faced the future with enthusiasm, confident that they competed in a deregulated industry. However, in April 2000, the tone changed because they had a pre tax loss of $93 million, and the newly appointed CEO announced a major change in the company business strategy that would influence to a transformation of business operations and human resources practices in the company.
1. In the middle of 1980s ANs external environment was privatised by Britain's conservative government, which exposed the company to competitive forces resulting in high competition and price wars in the market. They had to prepare for privatisation that required a painful restructuring because they needed to make the company attractive to initially sceptical investors. This gave the senior management the degree of stability to implement a new and HRM strategies. At the same time, there was a prolonged economic recession and the on going deregulation of civil aviation in Europe and America. With these negative forces, AN adopted a low cost competitive strategy and joined the industry wide price war. At this time, they were aggressive in the market place and they reduced costs in areas like service, marketing and advertising.
This low cost competitive strategy proven unsuccessful due to the fact that AN was unable to meet their customers needs because of the aggressive attitude and being too focused on the businesses procedures in reducing costs and forgetting the importance of their customers. The poor quality in customer service reflected on the businesses reputation evidentially causing the business more losses. Due to the critical state that AN was in, it realised that a clearer and more structures strategy was need and they worked on adding value to the business name in order to give them both the competitive advantage they need and resulting in satisfied customers. “Strategic management seeks to coordinate and integrate the activities of the various functional areas of a business in order to achieve long term organisational objectives”, (Bloisi, W., 2007, p.48). Their prioritisation of high quality customer service reflects on their understanding of customer value and by realising that their customers are their main focus point and satisfying them lead to better profits.
Launching a discount airline allowed the company to satisfy all classis of customers considering the economic situation and by providing a cheaper option attracts more customers. Operating as a separated company; the management structure was reorganised; AN's operations were divided into route groups based of five major markets. The previous low cost strategy failed to promote and expand the companies image therefore the companies new approach is invest in advertising to emphasise the added value elements of AN's services. As well as this new brand names and new uniforms for staff were introduced as part of the rebranding process, “…investing in employees… results in employees understanding organisational values and are able to commit to them”, (Robbins, S., 2001, p.69). In addition aircrafts and buildings were sold and unprofitable routes suspended or abandoned altogether to save and cut down on costs. Labour costs offered the most potential savings and with that, the company was able to focus on product development, marketing, customer service and HR development.
2. Initially the move that AN took was a leap from what is called Personnel Management to HRM, and there are 27 distinguishing characteristics separating the two according to John Storey. Human Resource Management could be described as strategic and proactive, “…strategies are on going and they constantly work towards managing and developing an organisations workforce”, (Leopold, J. 2002, p.96). It can be seen as proactive because of their continuous development and functions to improve…