The study investigates the management of multinational strategic alliances in the case of airline companies to achieve the goals of competitiveness and sustainability. Specific areas of investigation include the development of multinational strategic alliances between and among airline companies operating across different countries, factors behind the successes and failures of airline companies in engaging in multinational strategic alliances, and the means of effectively engaging in the various multinational strategic alliances to achieve targeted goals. This involves an important study because of the need to derive lessons from the experiences of airline companies to support decision-making and strategic planning to ensure the success of alliances. Primary and secondary data were collected to derive both qualitative and quantitative data to support the derivation of lessons. Results of the investigation were organized into chapters and sections to allow clarity and readability.
Table of Contents
Table of Contents. 3
Chapter 1: Introduction. 4
Context of the Problem.. 4
Statement of the Problem.. 6
Research Questions. 6
Significance of the Study. 7
Research Design and Methodology. 7
Organization of the Study. 8
Chapter 2: Literature Review.. 9
Chapter 3: Developments in the Airline Industry. 9
Chapter 4: Engagement in Multinational Strategic Alliances of Airlines. 9
Chapter 5: Lessons from Multinational Strategic Alliances of Airlines. 9
Chapter 6: Conclusions and Recommendations. 9
Reference List 9
Chapter 1: Introduction
Context of the Problem
Changes have occurred in the airline industry in the past two decades with the entry of low cost airlines and the occurrence of new business challenges such as security and other related issues. Apart from these, the airline industry also deal with issues arising from the nature of its operations such as the industry’s high sensitivity of the cost structures of airlines to external situations such as shifts in fuel prices, consumer demand, and labor market (Doganis, 2001). In addition, airlines operating on a global scale also experience many barriers to entry in domestic markets and regions such as variances in regulations and business environments (Costa, Harned, & Lundquist, 2002).
In managing these challenges, airlines generally have three strategic options, which are focusing on: 1) growth and expansion, 2) minimization of costs, and 3) niche marketing. Growth has to do with establishing strong brand equity for the airlines to ensure continues increases in the rate of revenue generation while expansion focuses more on increases in the market base of the firm to ensue sustainability. Minimization of costs refers to the implementation of cost-efficiency plans to ensure that the airlines operate at a level that allows it to optimize profit levels. Niche marketing pertains to the direction of airlines to focus on specific market such as low cost airlines for price conscious consumers and charter services for customized air transportation needs. (Kleymann and Seristo, 2004) These strategies may be applied single or in combination.
A continuously developing specific strategy that relates to all of these strategies is multinational strategic alliance. This pertains to the wide-ranging cooperation or partnerships between or among business firms operating in the global market. In particular, multinational strategic alliance has three elements: 1) the cooperation between at least two firms in the pursuit of common goals with the firms remaining as independent entities; 2) the sharing of benefits derived from the cooperation and controlling the accomplishment of tasks; and 3) contribution by the partners to core strategic areas to support mutual benefit. (Mockler, 1997a) Airlines operating on a global scale have increasingly engaged in multinational strategic alliances to enter domestic markets and expand services. However, there were successes and failures (Mockler, 1997a) alike indicating that the establishment of multinational strategic alliances in not easy or simple. The complexity of engaging and managing multinational strategic alliances is due to a number of reasons. First, many forms of alliances directed towards different purposes (Mockler, Dologite, Carnevali, 1997). Code sharing alliance facilitates the regulation of the movement of airlines from one country to another and joint ventures can cover financial to service delivery aspects. Second, multinational strategic alliance can be of different extents and scopes (Mockler, Dologite, Carnevali, 1997) so that partnerships can be just for connectivity or the acquisition of key competencies and capabilities such as technology or systems. Third, there are varying formalities and regulations involved in different multinational strategic alliances (Mockler, 1997b) depending upon national laws, extent of adherence of countries with international aviation standards, and compatibility of multinational regulations. Fourth, multinational strategic alliances can occur simultaneously with different business partners (Mockler, Dologite, Carnevali, 1997) since a firm may require various cooperative needs achieved through various partnerships. Fifth, although the partners retain their independent operations, some strategic alliances carry the consequence of affectivity and interdependence with the actions of business partners influencing the firm (Kleymann and Seristo, 2004). The effect could be positive or negative and it could be something covered by existing preparation or contingency plans of the company. The extent and manner of managing these complexities determines the success or failure of multinational strategic alliances in terms of the achievement of common and individual goals of airline companies. The effective management of multinational strategic alliances supports the development of competitiveness of airline firms in the global market together with the achievement of sustainability.
Statement of the Problem
Lessons arise from the successes and failures of airline companies in engaging in multinational strategic alliances. The investigation and derivation of lessons provides support to decision-making and policy planning of airlines in getting into multinational strategic alliances. The study seeks to the investigate the manner that airline companies manage multinational strategic alliances particularly the selection of business partners, determination of the effective form, scope and extent of alliance, handling regulatory issues, simultaneously dealing with different alliances, and developing contingency plans for the impacts and implications of engagement for different levels of interdependence arising from multinational strategic alliances.
The primary question for investigation is ‘how to manage multinational strategic alliances in the airline industry to facilitate competitiveness and sustainability’. To derive data and answer this question, the following specific questions served as guide:
How do multinational strategic alliances develop in the airline industry?
What explains the comparative successes and failures of airlines in engaging in multinational strategic alliances?
How can airlines effectively manage multinational strategic alliances?
Significance of the Study
The airline industry constitutes one of the most competitive and highly viable economic sectors because of the growing importance of air transportation in the context of globalization. The market for the industry is stable and growing with shifts occurring in the market shares of individual airline companies. In a highly competitive industry, airline companies enhance their position by enhancing their services relative to other business players. A key area of competitiveness in the airline industry is connectivity and range of operating networks covering a selection of services, destinations, and competencies. Maintaining a leading or top position facilitates the sustainability of airline companies. It is in this context that multinational strategic alliances grew in importance. However, although many airlines engaged in multinational strategic alliances, results varied with some airlines experiencing success while others failed. There is need for airline companies to fully understand the concept and process of multinational strategic alliance and develop alliances customized to allow mutual benefits for business firms with the effect of enhancing competitiveness and viability. Although a number of studies exist on the multinational strategic alliances in the airline industry, investigations were theoretical or conceptual or outdated and do not reflect the present context of the airline industry. The study seeks to contribute to existing knowledge on the management of multinational strategic alliances in the case of the airline industry by looking at the comparative experiences of airline companies engaged in this strategy to determine lessons as bases for recommendations on the ways that airline companies can effectively management multinational strategic alliances to achieve business goals.
Research Design and Methodology
The investigation combined qualitative and quantitative research approaches to derive both quantifiable and non-quantifiable data. Combining the methods resulted to the derivation rich data for analysis with quantifiable data supporting qualitative data and vice versa. The survey method served useful in the collection of primary data while library research and company reports served as sources of secondary data. In applying the survey method, airline firms engaging in multinational strategic alliances were determined. These companies were contacted by telephone and email to coordinate the data collection process. Managers with direct knowledge and experiences were determined and contacted to schedule a personal or phone interview as well as email communications to seek answers to the research questionnaire. The research questionnaire comprise of closed and open questions. Closed questions required the respondents to select from a set of choice answers or rate statements covering to determine the success or failure of the firm’s engagement in multinational strategic alliances. Open questions involved the provision of descriptions or explanations on the type, extent and scope of multinational strategic alliances entered into by the firm, the purpose or expected benefits from the alliance, issues faced during the process, and recommendations on key success factors. Data was analyzed using statistical measures such as means, standard deviation, and t-test and non-statistical tools such as comparison using themes determined from the data collected. Results were presented in tables, graphs or figures to allow clear or easy reading of the results of the investigation.
Organization of the Study
The study was presented in six chapters. Chapter 1 contains the introduction of the study specifically a contextual background, statement of the problem, research questions, significance of the study, research design and methodology, and the manner that the study was organized. Chapter 2 covers the literature review highlighting the discussion of key concepts and results of previous studies related to the research problem. Chapter 3 provides a discussion of the present developments in the airline industry resulting to the need for engagement in multinational strategic alliances. Chapter 4 contains a comparative discussion of the form, extent and scope of multinational strategic alliances of airline industries together with the expected benefits and effectiveness ratings. Chapter 5 covers the comparison of the problems or issues experienced by airline companies together with the derivation of lessons on the means of effectively engaging in alliances. Chapter 6 contains the conclusions relative to the investigation of the research problem and the provision of answers to the specific research questions. This chapter also covers recommendations relating to the limitations of the study and areas for future research.
Chapter 2: Literature Review
Chapter 3: Developments in the Airline Industry
Chapter 4: Engagement in Multinational Strategic Alliances of Airlines
Chapter 5: Lessons from Multinational Strategic Alliances of Airlines
Chapter 6: Conclusions and Recommendations
Doganis, R. (2001). The Airline Business in the Twenty-First Century. London: Routledge.
Costa, P. R., Harned, D. S., & Lundquist, J. T. (2002). Rethinking the Aviation Industry: New Strategies Could Help the Business Recover-But Will Also Put More Pressure on Established Players. The McKinsey Quarterly, 2, 88-100.
Kleymann, B., Seristo, H. (2004). Managing Strategic Airline Alliances. Aldershot: Ashgate Publishing.
Mockler, R, J. (1997a). Multinational strategic alliances: a manager’s perspective. Strategic Change, 6(7), 391-405.
Mockler, R. J. (1997b). Contingency models for developing multinational strategic alliances: The airline industry. Strategic Change, 6(6), 311-330.
Mockler, R. J., Dologite, D. G., ; Carnevali, N. M. (1997). Type and structure of multinational strategic alliances: The airline industry. Strategic Change, 6(5), 249 260.