Today, through transportation, humans were able to make trade relations with one another. Many business organizations make it a point to travel to different cities and countries to promote their products and services. Traveling and promotion are now part of an organization’s strategic management. From this, airlines play a major importance in the success of business organizations around the world. Business organizations are able to widen their market by traveling to different places via the airlines. Their importance leads us to evaluate their strategies in dealing with their business. This paper aims to discuss the problems of challenges that the airline would be encountering, with reference to concepts of strategic management. This will be done in the point of view of the board of directors of the company.



Problems or Challenges of CRE


            The financial status and report of the China Resources Enterprises Ltd suggests that the company can possibly enter the low-cost airline market through joint ventures and the recognition of Australia and the United States as its potential routes. Although this plan looks feasible for the company, the opinion or viewpoint of its board of directors must still be heard out before the plan would be executed and implemented. As part of the company’s board of directors, they have the responsibility to ensure the effectiveness of the plan, manage adequate resources, enhance the company’s image to the public, and monitor the company’s programs and services (McNamara 2007). In line with these responsibilities, members of the board of directors have recognized a number of problems and challenges that the company would possibly consider in pushing through with the plan.


            The primary problem or challenge that the company would be encountering includes the limited airports and related infrastructure that would efficiently provide air transportation services to customers (Efendioglu and Murray 2003). In this regard, the limited airports and the lack of its availability in the Hong Kong airport would also affect the operations of CRE. As such, although the plan presented looks feasible, the lack of airports in Hong Kong may entitle the company to only operate a limited number of aircrafts, thus, providing low-cost services to a limited number of customers.


            Another problem is the large amount of debts of the company, which would limit or restrict the operations of the company. The proposed strategy or plan involves a large amount of money that would be allotted for the purchase of new aircrafts, provision of new airline routes, and additional fuel purchase for additional flights. In this regard, it would not be advisable for the company to add up on its expenses, as the large amount of debt would only increase. This is a huge dilemma on the part of the board of directors because if they would not be able to provide adequate resources for the purchase or rent of additional aircrafts and allot resources for the purchase of petroleum, then they would be badly affected by the increase in competition from other airline companies.


            The third problem that the company would be encountering is in line with its aim to target customers from Australia and the United States. As such, the company is subjected to increase in competition, both locally and internationally. The problem that would be encountered here is the fact that other airlines have already established itself in the market, and because CRE is only new to the low-cost airline market, it would have a hard time to attract new passengers and building its image in the market. In this regard, the possible solution would be the joint venture with other larger airline companies. However, as a member of the board of directors, the main concern and issue here is the change in management of the company and culture clash. Nevertheless, it can be perceived that ample time and communication is the key for such joint ventures to become successful. In this regard, the board of directors would decide what company to merge with to ensure good business opportunities and profit.


            The aim of CRE to provide additional services and flights to Australia and the United States would entitle the company to become subjected to transport agreements and policies. Airline operations in Hong Kong and China are subject to a variety of bilateral civil air transport agreements that provide for the exchange of air traffic rights between China and other countries (Efendioglu and Murray 2003). However, in recent news, it has been reported that the United States has opted to liberalize the aviation market in Hong Kong with the Open Skies agreement, which entitles both parties to have equal operations (‘U.S. Official Urges HK to Liberalize Aviation Market’ 2005). The problem for this regard is the further increase in competition from other international airlines that have already been established in the airline industry. With this, it would be harder for CRE to cope with the increase in competition in the market. The increase in local and international competition would add pressure to the company, as its large amount of debt would limit their operations, causing dilemma of providing a successful and effective plan that would establish its reputation in the market. As such, this would be related to the number and quality of services that the company could provide to its customers, as the airline must ensure an effective service and feature in order to compensate its low-cost offering. In this regard, as a member of the board of directors, it would be best to consider the different options in order to provide better services to passengers that would commensurate to the low-cost offering of the airline.



Analysis


            From these problems, on the financial report, and strategic plan of the company, as part of the board of directors, it can be perceived that the most feasible thing to do is to push through with the joint venture or the merger with a larger airline company, such as the Southwest Airlines. Southwest Airlines was chosen for the joint venture because this airline company has been one of the most experienced low-cost airlines in the industry. It has been reported that it had the lowest operating costs of any US airline, had billion in cash, and had the strongest balance sheet and credit rating of any US airline, allowing management to quickly borrow an additional .1 billion and give the company a buffer to pay all its bills and absorb any cash drains (Thompson and Gamble 2003). In this regard, it can be seen that the CRE can learn a lot from the experience of the company, including its management and organization culture and structure. In addition, joint venture with Southwest Airlines would also provide CRE with an opportunity to operate in the United States, which is one of the potential markets recognized in the previous analysis. This would provide experience and learning for the company, as it would be given opportunity to adopt and implement new information systems, similar to the one used by Southwest Airlines. The large amount of debt of the company can be paid off in time, given its strategic alliance with Southwest Airlines, as CRE would have the chance to double its profit and sales, being associated with the prestigious company. This would enable CRE to become established in the low-costs airline industry, thus, in time, the profit and sales of the company would be increased.


            From the discussion, particularly of the problems to be encountered by the company, it would be best for CRE to categorize first the problems for a more structural and organized approach. The point of view of the board of directors is directed in the general approach, as they see the picture as a whole. In this regard, it would be first helpful to find resources for the company before anything else, and this can be effectively achieved with the joint venture with the Southwest Airlines. Although this decision may seem risky, this is the true essence of a business, which is to put up with risks that would determine the success or the failure of the business in its industry. As such, the board of directors is to put up with those risks, and one of them is the change in management and culture in the company brought about by the joint venture.



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