(A 25-page
double-spaced response is required for the combination of Parts A, B, C, D, and
E., please include reference page)
These past several
years have been troubling times for the airline industry. Jet
fuel prices alone have risen 110% from January 2001 to December 2006,
and 133% from January 2007 to July 2008. Each of the largest U.S. airlines
including United/Continental and Delta/Northwest, have filed for bankruptcy at
least once. American Airlines (AA) was
the only major airline that managed to stay away from bankruptcy for many
years. Despite not having turned a
profit in 2004 or the first half of 2005, the company hoped its turnaround plan
would start yielding results and put it back on the road to profitability and
increased market share. Unfortunately, American Airlines filed Chapter 11
bankruptcy on November 29, 2011, helping to hold off creditors, renegotiate
union and labor contracts, pass on pension burdens to the government, etc. On February 9, 2012,
Reuters reported that American
Airlines’ creditors’ committee wanted a merger explored, contrary
to American
Airlines management’s goal to stay independent. American Airlines
ultimately merged with US Airways in December 2013.
You are required
to take on the role of a strategic analyst hired before the final merger
decision was made. You must suggest ways by which American Airlines could
reinvent itself and compete effectively in an industry where the rules of the
game changed drastically. Based on your
own research on American Airlines and the domestic airline industry, prepare a
strategic audit using the format outlined below.
The following
steps are suggested in preparing your strategic audit.
1. Read
all of the instructions below and then perform research on American
Airlines. Make notes of the information
that you will need to use in writing your strategic audit as well as notes that
you think will be helpful in making decisions and recommendations.
2. Obtain
the information you need (regarding the organization, specific industry, and
recent events and changes) using the following resources.
a.
The
American Airlines website
b.
Hoovers
(This can be accessed through ProQuest:
Use American Airlines as your search term and limit your search to
within the Hoover database.)
c.
Articles
on ProQuest that are specifically related to the industry or current events
regarding the company, including:
Conaway,
D., Esq. (2012). American airlines: Who’s flying the plane? Business
Credit, 114(5), 34-37. Retrieved from http://search.proquest.com/docview/1016478509?accountid=45844
d.
Other
sources of research, which are recommended (but not required), include
newspapers, business magazines, news programs, trade journals, etc.
3.
Based
on the information and insights obtained from your research, apply your
knowledge of the concepts and techniques in the textbook, your professional and
personal experiences, and your analytical and reasoning skills to critically
evaluate the strategic performance of the company (at the corporate, business,
and functional levels) and suggest recommendations for future strategic
initiatives.
4.
In
addition, read the Stand-Alone Project Benchmarks in each Assignment to get an
idea of how to progress in this strategic audit as you work through the course.
Part A Situation: Discuss the following issues related to
American Airlines situation in 2013.
1. Performance: How has the company performed over the last
several years in terms of revenues, profitability, and market share?
2. Strategic Posture
a.
Mission: What is the companys vision/mission
statement?
b.
Objectives: What are the corporate, business, and
functional objectives? Are they consistent with each other and with the
mission?
c.
Strategies: What strategies has the company employed in
order to be able to meet these objectives?
Are these strategies consistent with each other and with the overall
mission?
3. Corporate Governance
a.
Directors: Who are the directors? Are they internal or external? What do they contribute to the corporation in
terms of knowledge, skills, and background?
b.
Top
Management: What persons or groups
constitute top management? How suited is
the management team to the achievement of corporate objectives?
Part B External Analysis
1. Porter Analysis: Perform an in-depth analysis of the firms
task environment using Porters Approach to Industry Analysis. Analyze the importance and impact of the
following five (5) forces.
a.
Threat
of New Entrants
b.
Bargaining
Power of Buyers
c.
Bargaining
Power of Suppliers
d.
Rivalry
Among Competing Firms
e.
Threat
of Substitute Products or Services
2. Other Characteristics: Describe at least three (3) other industry
characteristics that you think are important and that affect the performance of
firms in this industry.
3. Opportunities: Discuss at least five (5) opportunities
available to the firm based on the industry analysis.
4. Threats:
Discuss at least five (5) threats facing the firm based on the industry
analysis.
5. External Factors Analysis Summary: Develop an External Factors Analysis Summary (EFAS Table) for
American Airlines listing the five (5) opportunities and five (5) threats
described above. Discuss why you
consider these external factors to be important.
Part C Internal Analysis
1. Core Competencies
a.
Description: Describe at least two (2) core competencies
that the firm possesses or can develop.
b.
Distinctiveness: Are these distinctive competencies? Explain.
2. Competitive Position
a.
Current
Position: What is the firms current
competitive position? Discuss.
b.
Competitive
Advantage: Does the firm possess a
significant competitive advantage over other firms in the industry? Explain.
c.
Sustainability: Can the firm sustain its competitive
advantage over the long term? Explain.
3. Strengths:
Discuss at least five (5) strengths of the firm based on the competitive
analysis.
4. Weaknesses:
Describe at least five (5) weaknesses of the firm based on the
competitive analysis.
5. Internal Factors Analysis Summary: Develop an Internal Factors Analysis Summary
(IFAS Table) for American Airlines listing the five (5) strengths and five (5)
weaknesses described above. Discuss why
you consider these internal factors to be important.
Part D Analysis of Strategic Factors (SWOT)
1. Situational Analysis: What are the most important internal and
external strategic factors (Strengths, Weaknesses, Opportunities, and Threats)
that strongly affect the companys present and future performance? List 12 strategic factors (3 each of the
opportunities, threats, strengths, and weaknesses) and discuss the
relevance/importance of each to the strategic planning process.
2. Strategic Factors Analysis Summary: Develop a Strategic Factor Analysis Summary
(SFAS) Matrix for American Airlines using the strategic factors described
above.
3. Review of Mission and Objectives: Are the companys mission and objectives
relevant in light of the above external and internal strategic factors? Explain.
4. TOWS Matrix and Strategies
a.
Matrix: Develop a TOWS Matrix for American Airlines,
listing three (3) opportunities, three (3) threats, three (3) strengths, and
three (3) weaknesses.
b.
Strategies: For each category (SO Strategies, WO
Strategies, ST Strategies, and WT Strategies), develop at least two (2)
alternative strategies based on these factors; this is a total of eight (8)
strategies.
Part E Strategic Alternatives and Recommended
Strategies
1.
Strategic
Alternatives: What are the major
feasible alternative strategies available to the company? Select and describe the top four (4)
strategies that you think upper management should consider as part of the
strategic planning process.
2.
Recommended
Strategies: Which of the above strategic
alternatives do you recommend for the organization? You must make at least two (2) comprehensive
recommendations that describe the strategic direction you think the firm should
take based on its current situation and issues.
Your recommendations can include corporate, business, or functional
strategies based on the facts of the case and your analysis of the firm. Number your recommendations and group them as
applicable (for instance, if you recommend a low-cost business strategy, list
any functional strategies that lead to it as sub points).
NOTE: There is no right or wrong choice; however,
you need to justify your recommendations in terms of their impact on the
profitability and long-term competitive position of the firm.
3.
Justification: Justify your recommendations in terms of
their impact on the profitability and long-term competitive position of the
firm. Use the following criteria to
guide each of your recommendations.
a.
Relevance: How does the recommendation deal effectively
with the strategic issues facing the organization?
b.
Sustainability: How does the recommendation lead to a
competitive advantage that is sustainable over the long term?
4.
Commentary: Read the following article and comment on the
final decision made by American Airlines in 2013. Why do you feel this was a
good/bad strategic decision?
Arnold, K. (2013, Dec 22). No. 1
business story of 2013: American airlines merger. McClatchy
Tribune Business News Retrieved from
http://search.proquest.com/docview/1470294132?accountid=45844
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