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MBA 570 Week 6 Version 2

MBA 570 Week 6 Version 2 - Problem Solution Classic...

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Problem Solution: Classic Airlines 1 Running head: PROBLEM SOLUTION: CLASSIC AIRLINES Problem Solution: Classic Airlines Tammy Wortherley University of Phoenix Professor Dawn Obermoeller August 31, 2009
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Problem Solution: Classic Airlines 2 Problem Solution: Classic Airlines Introduction Today, companies function in an international marketplace with fierce competition in every industry. Therefore, maintaining viability is essential and change is constant and non- relenting. For that reason, companies no longer have a choice and in order to survive they must change (Kinicki & Kreitner, 2004). Classic Airlines is embarking on a journey of change and in order to navigate the impending changes Classic Airlines will have to make difficult decisions to assure a competitive advantage. Describe the Situation Situation Background Classic Airlines has grown to an organization of 32,000 employees since starting operations. Last year the company recorded $10 million profit on $8.7 billion in sales. While the airline is profitable, the stock prices have decreased by 10% in the past year and employee morale has been at its lowest due to increase scrutiny on the airline industry from all sectors of the economy. (Classic Airlines, 2009) Classic Airline's customer loyalty is on the decline as evidenced by the 19% decrease in the number of Classic rewards members and 21% decrease in flights per remaining member. The company is also facing a restrictive cost restructure due to optimistic over expansion plans based on anticipated rebound of post 09/11 travel. Classic’s Board of Directors recently mandated a 15% across-the-board cost reduction over the next 18 months (Classic Airlines, 2009). Within the constraints of the mandate, Classic also needs to improve the frequent flier program with methods that will demonstrate a measurable return on any investment (ROI) while still meeting the cost reduction goal.
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Problem Solution: Classic Airlines 3 Classic is the only carrier which does not have a partnership alliance agreement, under the assumption that no one else can understand or meet the needs of its customers better than Classic. In addition, the carrier implemented a pricing strategy that put the company in direct competition with younger airlines, which do not have the same cost structure as Classic, resulting in an advantage for the competition. The ability of Classic to predict accurately changing market and consumer trends will enable the carrier to augment marketing campaigns, adjust budgets, and reallocate resources to take advantage of prevailing trends or conduct informational and promotional marketing during the off peak seasons. The more data that Classic can collect from all sources, but especially existing customer, the more accurately the carrier can predict and meet changing or unmet customer needs. Therefore, the methodology used and the operational philosophy of Classic needs to be aligned with such a strategy. These issues have created opportunities for Classic Airlines to address the root cause of the problem. Additionally, the
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