Norwegian Air Expansion Services – Case Study Example
Proposal for Norwegian Air expansion services
A critical analysis of the airline industry especially in the European region shows that it is characterised by fierce competition among the existing players. In case of Norwegian Air, it can be observed that it has considerable market share in major EU market hubs where it has been enjoying a large market share from 2010 to 2014. The other aspect is that since inception, Norwegian Air used to be a European carrier but it is high time it diversifies into the budget intercontinental market in order to be in a position to service the demand that has not been serviced which in turn can help it to gain a large market share. As such, I am going to outline the measures that ought to be taken into consideration in as far as expansion in the routes serviced by the airline is concerned.
Norwegian Air has witnessed an increase in operating costs in 2014 and it also witnessed a net loss of 583.751 million NOK attributable to fare value adjustment for that period. On top of this, the company has also been experiencing a downward trend in revenue per available seat kilometer (RASK). The other issue is that the Open Skies Treaty of 1992 has deregulated the airline industry in Europe making competition in this region one of the fiercest in the world leading to price wars. Barriers to entry into the industry have been removed. All in all, there are 54 budget airlines in Europe and Ryanair is the major threat to Norwegian Air in the European region. As such, it is proposed that the airline expand its services to intercontinental destinations connecting North America and Asia and Australia.
Connecting Asia and Australia to North America could significantly help diversify Norwegian’s routes and move away from the European market which is highly competitive. There are quite a number of advantages that can be derived from embarking on this particular expansion drive. For instance, Norwegian’s value proposition should be grounded in its core values that accountability, transparency, fairness, and simplicity in order to appeal to the interests of many customers as well as potential customers. This proposed route is suitable for the airline given that competition in North America is not as fierce as in Europe.
The other issue is that competition in North America, Asia as well as Australia is not as intense as in the European region. Norwegian Air's position gives it competitive advantage given that its prices are different from the rest of those offered by the other competitors in the same industry. The company should harness on this strategy to attract as many customers as possible. The other advantage of choosing this route is that both Australians and Asians are fond of traveling and this would significantly help the airline to generate more revenue from the new route. Asia is also seen as an emerging market with future prospects of continuous growth. This entails that the operations of the airline would not be severely impacted by different economic factors in the countries where it would be operating.
However, the other issue is that Norwegian Air should take into consideration the macro environmental factors characterising the airline industry. The firming of the US dollar against the Euro for instance should be seen as an opportunity to penetrate the above mentioned route since this would help the company to operate profitably.
Following the identification of the route connecting North America and Asia and Australia as ideal, it becomes imperative for the human resources management to identify the people who would perform different tasks in servicing this new route. The human resources management should also select the right people who are capable of satisfying the needs of the customers as well as those of the company. Implementation of the initiative should be done at senior management level within the company with the approval of the CEO and President as well as the board of directors. This needs about two weeks while monitoring and evaluation are other tasks that should be periodically carried out by the management personnel in different departments within the airline’s organizational structure. In as far as the balanced scorecard is concern, focus on the customer is meant to ensure that loyalty among them is created in order to achieve long term viability of the company. Learning helps to enhance the development of quality leadership styles which helps create a balance between the needs of the company and the employees. The internal processes should be focused on the core business of the company in the aviation industry. The financial component should be driven towards increasing the revenue generated by the company from its operations in light of the competition that exists in the aviation industry.
Let me take this opportunity to extend my sincere gratitude for giving me this singular owner to prepare this memo for your consideration in as far as route expansion by Norwegian Air is concerned. It is my conviction that you would find this information valuable as we strive to continue maintaining and enjoying a large market share in the budget airline industry.
Appendix 1: Norwegian Air’s Balanced Scorecard
Increase revenue generated from the operations of the company through expanding the airline’s routes
Growth of revenue generated while at the same time lowering operational costs
Increase revenue generation by about 25 during the first year of plying the new route
Expansion of service routes by the airline
Create customer value and loyalty through service improvement
Create customer satisfaction which ultimately leads to customer loyalty
Aim to maintain maximum customer satisfaction levels.
Implement customer loyalty programs such as offering price discounts.
Internal business services should be oriented towards fulfilling the needs and interests of the customers.
Maximize business opportunities
Attain about 90% of employee satisfaction within the company.
Employee involvement in decision making
Promote learning and development through implementation of initiatives aimed at generating knowledge among all the employees
Identify the gaps that exist in terms of aspects related to knowledge development through training and development
Improve employee competencies
Promote learning and development initiatives among the employees