Analysis Of The Strategies Adopted By United Airlines
This paper analyses the strategies adopted by United Airlines and how its business model adds value for organization. The paper is divided into three parts. First part evaluates the organization’s business model and strategies’ success or failure over history. Second part evaluates the opportunities and recommendations for strategic direction and third part develops the implementation plan for United Airlines.
United Airlines’ pattern of past strategies
United Airlines is one of the major United States airlines. It is headquartered in Chicago and was founded in 1937. The airline experienced major changes due to external environmental turbulence. However, the organization’s ability to integrate the flexibility into its corporate, business and international strategies allowed the United to become one of the most successful airlines today. A well-integrated international growth strategy along with strategically wise moves into existing oligopolistic structure helped United to gain recognition as one of the best legacy carriers. During its history, the United Airlines’ corporate and business strategies have met success as well as failure. For example, during 1960 to 1980, the company faced difficulties due to internal management issues and had six presidents. At that time, its strategy of expanding and venturing into different business aspects was not successful. The purchased companies added no value and later were re-sold. Its strategy of remaining ahead of competitors during whole history has also faced success and failure. United also made efforts of making mergers without taking Union’s approval and remained unsuccessful as according to department of justice, such mergers could have an adverse effect on competition. But United learned the lesson from its failures and emerged as a strong airline after its strategic decision of developing major strategic partnerships with companies like One World, Star and Wings.
Business model of United Airlines
Currently, United has a mass market model that places no specific attention towards differentiation. It creates value for customers through four major value propositions- brand/status, accessibility, innovation and cost reduction. United’s one successful decision was to use hub and spoke method. This method allowed company to offer different terminals and airports to customers. It not only helped in streamlining flight schedules, but also helped United to reduce the cost by yearly saving millions of dollars. In this way, the business model created value for customers and this value was converted into profits in both ways- by reducing costs and by increasing revenue due to enhanced flight experience.
Success of chosen business strategies in past and present The United airline’s business, functional and international expansion strategies have been partially successful in past due to challenging economic and competitive environment. However, the airline has gained significant strength with time and today, it is classified as world’s one of most successful airline.
The United’s business and corporate strategies have been partially successful as strategic decisions taken over the span of history were not always right, and company also faced challenges imposed by complex external environment since its foundation. Currently, United has adopted an aggressive international growth strategy. But, it should learn from the past mistakes of failed merger attempts. United’s attitude towards using advanced technology has been proactive. Still, there is a scope for improvement. Recently, United faced criticism due to an unfortunate incident when a passenger was bleeding because it was dragged from an over booked flight. It raised questions about the feasibility of its current mass market business model. United can increase investment on technologies along with possibilities of revising business model to avoid such incidents. Use of artificial intelligence to govern the business operations can help United airlines to use advanced predictive tools to minimize the chances of undesired circumstances.
It can also be used in revising the business model and offering dynamic pricing to different markets. The cognitive computing and robotics can also improve the United’s operational efficiency. Most importantly, the artificial intelligence can help the United to resolve its overbooking problem and resolve the problems faced by its passengers. With AI, United will be able to make effective use of passenger data. The data could also be used to know who needs destination, when it is needed and which employees could be allocated. With the help of machine learning, United can determine when and who could be allowed to board. With the help of it, United can overcome its problem of overbooking, operational inefficiencies internal problems. It will also enhance the flight experience of passengers. Investment in the automated check-in process can also help the United airlines in resolving operational inefficiencies as this technology will help passengers to express if they are willing to exchange seats for compensation. Finally, investment in creating the social media campaigns by using automation technologies can also help United to overcome the negative PR after passenger dragging incident and frequent overbooking of United’s flights.
The adoption of artificial intelligence is not without costs. United would have to make resource investment in terms of time and money. The direct and indirect costs in the form of resource investment, alignment with the current IT infrastructure and arranging the training sessions to match skills of its human resource with newly adopted technology will be incurred if proposed recommendations are implemented. However, the comparison with the benefits offered by AI in the form of enhanced operational efficiency and reduced chances of flight overbooking outweigh the costs and make investment in the cognitive technologies a strategically wise move. If United successfully leverages these opportunities, its future strategic position will improve significantly and chances of its survival in complex and highly competitive passenger airline industry will also increase.
United should revise its aggressive expansion strategy and wise choose the strategic partners by learning lessons from past failed merger attempts. Current mass market business model should be revised and aligned with the airline’s capacity, capabilities and resources. It should invest on the artificial intelligence to resolve the internal operational inefficiency issues. The automation technologies can also be used to start social media campaigns for reducing the effect of negative PR. Automation technologies with advanced predictive tools can be wisely used to reduce over booking chances. United should also adopt automated check-in process to handle the unexpected situations and solve over booking problems without hurting passengers.
United management should make optimum use of passengers’ data to make accurate demand and capacity predictions. The internal stakeholders majorly responsible for executing these activities are United management, employees and flight attendants. Middle management can play very active role during the implementation process. Passengers are the external stakeholders whose flight experience could be influenced after successful implementation. United’s shareholders also have a stake as successful or unsuccessful implementation can affect the operational efficiency, and ultimately the profitability.
Middle managers/supervisors will be mainly responsible for installing technologies, arranging training sessions to update workforce’s skills and handling the change process. Top management will play its role by providing necessary resources and support. Being one of the largest airline in USA, United has required financial, human and technical resources to carry out these recommendations. United management can smooth out the change process by addressing the employees’ concerns, clearly communicating the need of adopting new technologies, assessing the current skills and competencies of workforce and arranging training sessions to match the skills so that adopted technology could be used effectively. The successful implementation of these recommendations can result into reduced chances of over booking, increase in the operational efficiency and a more satisfied customer base due to improved flight experience.
To conclude, the United Airlines is recommended to increase its investment on the cognitive technologies and increase the use of artificial intelligence and automation technologies for maximizing the efficiency of current business model. It will not only resolve the overbooking challenges and operational efficiency issues, but will also improve competitive positioning by creating value for customers.
