April 25, 2011
University of Phoenix
Classic Airlines, one of the largest airlines in the country, “commands a fleet of more than 375 jets that serve 240 cities with over 2,300 daily flights” (University of Phoenix, Classic Airline Scenario, 2011) and has gained 32,000 employees with earnings of $8.7 billion in sales. September 11, 2001 was the start of the economic crisis for the airlines, along with the rising costs of operations. Classic Airlines has internal and external factors, which also contribute to the airline’s crisis. Addressing the crisis, Classic Airlines should consider using a ten-step basic ...view middle of the document...
Intensity of the Problem
The second step of the method is to measure the problem and its intensity. Measuring the problem, data needs to be collected from all relevant factors such as customer satisfaction. According to a customer satisfaction survey 56% of the customers are not satisfied with the current reward system when redeeming the points. Forty-six percent of customers switched to another airline. Sixty-eight of the customers are not going to recommend Classic Airlines to family or friends (University of Phoenix, Classic Airline Scenario, 2011). Employees’ moral decreased from fear of losing their jobs and decreased efficiency. Another measurement of the problem is that a 15% cut in the departmental budget. Classic Airlines is aware the areas of operations that need to be focused on from this point.
Establishing Goals to Solve the Problem
The next step is to establishment goals to solve Classic Airlines problems. Creating different types of goals enables Classic to take different paths to resolve their issues. All goals set must be meaningful, measurable, and manageable (Kotler, & Keller, 2006). Classic Airline’s goal is to increase profits, customer loyalty, customer satisfaction, and employee morale. To measure Classic Airlines profits Classic can compare the airline’s profit to other airline companies’ profits and the previous years’ profits. Classic Airlines can also compare other airline’s reward programs and reports on the most rewarding reward program. The reward program should provide a reward for customers, which shows a considerable return for the investment. Profit and market shares will determine the reward program’s rewards. Classic Airlines must take into consideration the airline’s budget and profits to meet the airline’s goals.
The Causes of the Problem
The fourth step in the method is to determine the cause of the problems. To determine the cause current operation procedures is examine to determine which areas need to improve and which areas are currently working well. To increase profits, improve customer satisfaction, and create loyal customers the company will have to make major changes. Classic Airline’s scenario an internal problem to be corrected is management behavior. Management is only worried about costing cut and raising profits. Management needs to focus on marketing techniques and customer satisfaction to increase airline sales. Although Classic Airline is currently using the fuel hedging program (a locked in price for fuel for the year), which saved the airline 12% in fuel cost last year (University of Phoenix, Classic Airline Scenario, 2011) to increase profits, this will not save the company enough money if there are no customers. From the rising of labor and overhead cost, management mandated all departments to cut cost by 15% without affecting the quality of service and employee morale. Classic Airline’s marketing department has to take this issue of cost cutting into...