Star Alliance: Strategic Issues Essay

2434 words - 10 pages

The creation of Star Alliance is rooted in the deregulation of the Airline industry. Prior to that time most operators were viewed as inefficient carriers needing government support. Finally, governments had enough and decided to allow competitive forces eliminate inefficiencies from companies by deregulating the industry. One-way was to let new entrants into the marketplace and allow operating costs and prices to fluctuate depending on free market competition.Deregulation ushered in alliances between many domestic and international carriers designed to increase routes. This "open skies" environment saw a free flow of travelers around the world. However, terrorism, a worldwide recession, and the Gulf war slowed air traffic by 25% (Bartlett, Ghoshal, & Birkinshaw, 2004). The terrorist's attack on September 11, 2004 dealt the airline industry another blow. With increased costs because of security and declining traffic, industry losses mounted to over $7 billion, which lead to over 200,000 job losses (Bartlett, et al. 2004). This new environment, along with the Internet and changing consumer behavior about air travel, created new low budget carriers such as Southwest, Ryanair, and easyJet.In order to combat rising costs, decreased air travel, and low price carriers, airlines created alliances. These alliances increased competitive advantages for the member airlines by, combining marketing, procurement, systems, and even flight crews. By 1990 500 alliances were created. In May of 1997 Star Alliance was launched with Lufthansa, United, Air Canada, SAS, and Thai Airways. Today, Star alliance is the global leader, controlling 29% of the world's market share as measured by revenue passenger miles. A key strategy of Star Alliance is expansion. The recent addition of Air Portugal, South African Airways, Blue1, and Scandinavian Airlines, creates a network that covers 833 destinations in 152 countries (Mecham, 2004). However, the major target market is the large China market place. Star has made several unsuccessful attempts to entice Air China into their alliance. There has been a lot of skepticism from the Civil Aviation Authority of China over the longevity of Star Alliance (Mecham, 2004).Another key strategy of Star Alliance is customer loyalty. They partnered with airline consortium Troughton Wunderman Inc. to oversee their frequent flier and customer loyalty programs. Star Alliance's advertising strategy will target existing members' customers with TV ads, direct mail, digital marketing, and customer relationship programs (Bold, 2004). In addition, Star launched a marketing campaign against rival Oneworld by offering to match status of its loyalty members. The campaign initially targeting British Airlines but will soon is rolled out internationally (Bold, 2004).We would have to agree with Professor Yip's view of the continued successes of alliances. The assessment of the airline industry, through Porter's Five-Forces Model of Industry Analysis,...

Find Another Essay On Star Alliance: strategic issues

Lufthansa 2000: Maintaing the Change Momentum

7552 words - 30 pages SummaryIn 1991 Lufthansa airlines was almost bankrupt. In 1999 the company already announced record results in its 70-year history, helped to found the Star Alliance, the industry's largest network, and is now looking to become one of the leading airlines in the world.An impressive strategic leadership und human resource management played an important role in the transformation and in the process of strategic renewal. The implementation of an

NATO And Cold War Essay

990 words - 4 pages want the alliance to break up. NATO is a good example of this as support stems from former NATO officials, defence intellectuals, military officers, journalists and policy analysts. All who have addressed the issues facing Euro-Atlantic cooperation and conflict. Coupled with this is that a highly institutionalized organization may indeed provide the necessary capabilities, that would be useful in the future. Especially in the area of cost. NATO

Singapore Airlines

7843 words - 31 pages member of the Alliance and strengthens the Alliance members' positions in the Asian region . (See Appendix XXX for other members of Star Alliance). SIA's membership in the Alliance eliminates several of its former competitors and rather than continue to compete with these carriers, SIA made the strategic decision to pool resources through takeoff and landing rights and further expand its global presence.SIA's Key Success Factors - Determinants of

Strategic network

4137 words - 17 pages are some key issues to be considered. Thereafter the advantages and disadvantages of strategic networks as well as how strategic networks can be viewed as a source of competitive advantage will be dealt with.2. What is a strategic network?Jarillo (1997:7) described strategic networks as an arrangement by which companies set up a web of close relationships that form a veritable system geared to providing products of services in a coordinated way. In

The European Union and Airlines

1346 words - 5 pages the deregulation of the airline market in the United States. 5. British Airways and American Airlines have to keep trying to form their alliance. With a properly formulated proposal they have better chances to be granted the permission to create the alliance. If permitted, this alliance will unite 60% of the airline traffic that goes through Heathrow Airport in the U.K. Considered to be gate of the European continent. 6. Star alliance should

Strategic management - trust, commitment and culture

2267 words - 9 pages them once they are established. "Too often, top executives devote more time to screening potential partners in financial terms than to managing the partnership in human terms." (Child and Faulkner, 1998) They neglect the "softer side" of alliance issues such as relationship management including the building of trust, commitment and cultural compatibility. Concentrating only on the alliance formation is not enough for the manager whose job is to

Business Networking

3097 words - 12 pages successful. Setting up an alliance is thus an important stage in airline networking. In an alliance, marketing and operational benefits are not limited to airlines only, they also extend to customers (for instance, frequent flyer programs and integrated route networks).Today the three main airline alliances (One World, Star Alliance and Sky Team) account for sixty per cent of the total world airline capacity, with 18 of the world's 20 biggest

Laura Ashley and Federal Express Strategic Alliance Case Study

884 words - 4 pages Federal Express.The contract between LA and BSI for the strategic alliance was not your typical contract with specific rules, price, penalties, etc. The alliance was a "win-win business partnership," with no defined end point and lasting at least for 10 years. The contract had a very relatively loose structure, and it was based on trust and focuses on areas of mutual interest. There were no specifics on defining issues since it may conflict with

The global logic of strategic

2633 words - 11 pages INTRODUCTION The topic under review is strategic alliances. This particular form of non-equity alliance between firms in the same industry (competitors) is becoming an increasingly popular way of conducting business in the global environment. Many different reasons of why such alliances are occurring have been recognised. These include: the increasing globalisation of the world's economy resulting in intensified global competition, the


1451 words - 6 pages 2000 and 2001 when compared to the years 1998 and 1999. Our forecast shows a further decline on the return on equity, indicating a lower return on the investments made by the investors. Major Strategic Alternatives Couple of strategic alternatives is available for the issues that are faced by Star River Electronics. Strategic Alternative # 1: Whether to borrow short-term funds from banks or switch from short term borrowings to long term debt or

Airline Alliances

1828 words - 7 pages . During the early 90's, airlines such as Pan Am and Eastern were liquidated while Continental and TWA filed for bankruptcy. In desperate acts searching stability, the airline industry began to look internationally for foreign partners that would allow them access to more profitable destinations. The first alliance was formed in 1993 between KLM and Northwest. The formation of strategic alliances began as result to the Deregulation Act of 1978.Foreign

Similar Essays

Strategic Alliances In Aviation Industry Essay

1600 words - 6 pages used to analyse the profitability of airlines after entering into some kind of strategic alliance. We will focus on two major alliance in aviation sector namely Star Alliance and One World to reach the answers of research questions. (overall a good proposal where we are experiencing various alliances such as Etihad with Darwin Airline and Air Serbia ; Literature Review Since airlines have historically shown poor performance, it has been

Benefits And Challenges Associated With Using Strategic Alliances

1851 words - 7 pages an alliance, there are changes that cannot be predicted in the firm's environment. In addition, important issues faced by management in an international alliance includes; alliance formation, governance structure of the alliance, alliance synergies and measurement performance of alliance. Is necessary to note that termination of an alliance does mean failure. In conclusion, strategic alliance has been a successful tool used in many markets, is

Second Memo Essay

951 words - 4 pages , despite the top managements willingness for intervention. Both companies, Cisco and HP, had changed the structure of their alliance managers. HP changed their manager for Cisco global alliance from Fontana to Jim Heal. A similar change occurred as well in Cisco’s camp, where Thomas took over as director of Cisco’s HP alliance. Now, people involves in negotiations have changed, along with the strategic priorities of the BUs. Recently, the merger of

Fly To The End Of The World: Air New Zealand

2068 words - 8 pages -operationThreats- Domestic and international competition- New Airlines entering the New Zealand marketAccording to the above analysis, case issues will be identified as follow:1) Did Air New Zealand's strategy of joining the Star Alliance Group is a successful strategy? Are there any changes in marketing environment will influence the company's strategy plan?Marketing environment as one of important variables significantly affects marketer's decision