Shipra_Trans World Airlines-Case solution.ppsx

MISS SHIPRA VIRMANI/ASST.PROF./SSIPMT, RAIPUR

FACTS OF THE
CASE

 TWA- one of the three major airlines in the United
States.
 During 1970s- 210 planes in its stock.
 Operations- Europe and India.
 Domestic hub- St. Louis, Missouri
 Competitors- United Airlines, American Airlines

Financial trouble because of increased competition.
Outdated aircrafts (Sold them to buy new ones, still
couldn’t get enough revenue to buy).
High labor costs.
No job security to employees.
Pressure from union grant job security.
Highest pay increase of 30 %

Reduced service & reliability
Numbers of passengers decreased.
Domestic expansion- Not possible

Could these problems have
been avoided by proactive
planning?

The answer is YES

How?
By applying either SWOT
analysis or Michael Porter’s
five forces model .

The model

Segment Rivalry

Intensity increases as:
* The number of competitors increases or they become
equal in size.
* Demand for the industry’s products declines or industry
growth slows.

 First of all, TWA must have been proactive in their
planning as the competitors or the rivals will compete for
the same customers. They could have made their plans
keeping in view the future, e.g., the deregulation of airline
industry.
 They could have identified their competitors (UA & AA)
 Must have tried to find out their strategies (E.g. Customer
retention, pricing & the like)

Threat Of
Substitutes

 Substitute products refer to products in other industries. A
threat of substitutes exists when a product's demand is
affected by the price change of a substitute product.
 Threat of substitutes typically impacts an industry through
price competition.
 Substitute products in this case could be different modes of
transportation like railways, roadways, sea travel.
 This also could have been taken into consideration by the
TWA management. MISS SHIPRA VIRMANI/ASST.PROF./SSIPMT, RAIPUR

Threat Of Buyers

 Buyer may be an individual or a group of individuals who
acquires the product or avails the services.
 TWA must have taken good care to convert their customers
into loyal customers by offering excellent services, loyalty
packages which might include various things like payback
card, offering discounts on regular travel, arranging for their
stay at company’s guest house & the like.

 They could have taken the feedback from customers, could
have asked them about what additional services they want,
whether they are happy or not by availing services & so on.

Threat Of Suppliers

 An industry may require raw materials, labor and other supplies.
 This requirement leads to buyer-supplier relationships between
the industry and the firms that provide it the raw materials
used to create products.
 TWA must have negotiated the price with Boeing & could have
asked for discount for the purchase of new aircrafts.
 Could have searched for multiple suppliers & must have analyzed
& compared their product, price, reliability etc before
finalizing.

Threat Of New
Entrants

 It is not only incumbent rivals that pose a
threat to firms in an industry; the possibility
that new firms may enter the industry also
affects competition.

ANSWER

 As they were in financial trouble, they could have taken
loan from the banks or any other financial institutions to
maintain their reliability.
 Rather than selling the old aircrafts, they could have
repaired them or could have upgraded its features.
 They could have improved their services by giving training
to the employees.

 Rather than increasing the salary to 30%, management
could have told the problems to the union and gave them
assurance that they will grant security once TWA comes
out of the financial trouble. Salary could have increased to
5% and the rest money could have been used somewhere
else.
 By doing so the union members and the employees could
feel motivated and work hard to bring back the airlines in
a position where it was before.

COST REDUCTION BY ADOPTING SOME OR ALL OF THE
FOLLOWING IDEAS:
 Online ticket booking
 Punching machines for seal
 Increasing number of lines
 Informing customers if the flight gets delayed
 Seat allotment- First come first take
 Increase trips by reducing ground haul time as still aircraft
is a cost to the company.
 Ground activities improvement
 Domestic flights- Low frill (Food/ water on payment )

Discussing the company’s situation with its employees &
asking their suggestions.
Negotiate & convince employees on salary reduction matter.
 VRS/ CRS
 Product recall
 Privilege customers
 Travel agent commission reduction- Less or no commission on
single ticket, More on bulk.

Did Mr. Pearson make the
right decision in
restructuring the authority
and responsibility area at
the airport? Did it make
much difference in the
profitability of the airline?

 Yes Mr. Pearson made the right decision of restructuring
the authority as it improved the flow of information.
 Restructuring gave more authority to one manager and all
the other divisions have to report to that manager who in
turn will report directly to Mr. Pearson.
 First of all this reduced the cost as different functional
managers are eliminated, instead there is just one
manager.

Also Mr. Pearson is directly keeping an eye on what is
going around in his company.
As too many people are not involved in between, chaos will
not be there.
As authority is given to one manager, he/she could feel
motivated and hence could put in a lot of hard work.

End

Shipra_Trans World Airlines-Case solution.ppsx

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