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Chapter case study The Competition

AIR NATIONAL In the middle of the 1980s, AN’s
external environment was subjection
Air National (AN) 1998 Annual Report to two sells of significant change first
glowed with optimism Bradley Smith, in 1986, AN was
CEO, stated in his letter to
shareholders, ‘As ‘a newly privatized
company, we face the future with
enthusiasm, confident that we can
compete in a deregulated industry. By privatized by Britain’s conservative
April 2000, however, the tone had government. This potentially reduced
changed with a reported pre-tax loss the political influence of the old
of $ 93 million. The newly appointed corporation and exposed the new
CEO, Clive Warren, announced a major company to competitive forces.
change in the company’s business Preparation for privatization required a
strategy that would lead to a transfer painful restructuring and ‘downsizing
motion of business operations and HR `of assets and the work force, which
practices in Europe’s largest airline AN was able to deploy to secure
company. further stability in its key product
markets. It was this context, rather
than the stimulus of market
Background
competition, that gave senior
During the early 1980, civil aviation management the degree of stability
was a highly regulated market, and and security needed to plan and
competition was managed via close, if implement new business and HRM
not always harmonious, relationships strategies. The second set of pressure,
between airlines, their competitors potentially more decisive, was
and governments. National flag- generated by prolonged economic
carriers dominated the markets, and recession and the ongoing
market shares were determined not by deregulation of civil aviation in Europe
competition but by the skill of their and North America.
governments in negotiating bilateral
With these environmental force, AN
air service agreements. These
attempted to grow out of the recession
agreements established the volume
by adopting a low cost competitive
and distribution of air traffic and
strategy and joining the industry-wide
thereby revenue within these markets,
price war. Bradley smith, when he
A dominated other carriers, despite
address his senior management team,
the emergence of new entrants, AN’s
started, ‘this strategy required us to
share of the domestic market in the
be aggressive in the market place and
early 1980s, for example, increased by
to be diligent in our pursuit of cost
60 percent.
reductions and cost minimization in
areas like service, marketing and

Clive Warren.1). strategy and began to develop a differentiation business strategy (Porter. In Group 1 Group 2 Group 3 addition. Aircraft and America and there was a costly battle for buildings were sold and persistently market share between AN. contributing to a pre-tax loss.first’ programmed propter a divided into route groups based on major review of the management of five major market (Exhibit 2.advertising. AN biggest redundancy programmed in prioritized high quality customer British history. Passenger number value elements of AN’s services. new discount AN’s Northrestructuring also aimed to cut India Pacific airlines started operating in Europe. international air travel booking fell sharply. hop jet unprofitable routes either suspended Airline and Tango Airline. The company’s advertising . In 2002 following the September 11 attacks in new York and Washington in CORPORATE which four commercial planes were MANAGEMENT hijacked and crashed. killing most 3000 people. Air National’s new human with a particular emphasis on resources strategy marketing. Each employees and their interface with group was to be headed by a general customers. ‘re-engineered’ the company programmer was underway the and launched a discount airline that company was able to focus on pro operated as a separate company. early in 2002. Labor costs offered strategy the most significant potential savings. management structure was customer service and HR reorganized to provide a tighter focus development. marketing. The low-cost competitive began also to emphasize the added- strategy failed. and changed its competitive cabin crews and point-of service staff. The catastrophes caused the loss of more than 100000 airline jobs around the world. or abandoned altogether. The duct development. the company’s cost base. AN’s overall route portfolio was cut by 4 per cent Air National’s new competitive during 2001 alone. and 1980s. and with 35000 employees AN’s re- Under the guidance of the newly engineering included ‘ one of the appointed CEO. New slumped by 7 percent during the gate brand names were developed. manager who was given authority over the development of the business.. new uniforms were developed.1980) or what is also referred to as an ‘added-value’ strategy. and Following the appointment of the new new uniforms were introduced for the CEO. Once the recundancy service. AN’s operation were customer. The company’s on operational issues beneath sharpened focus on the new ‘ corporate level.

AN’s director of human resources. the wake of this restructuring process were remove. ‘In an industry like ours. outlined AN Institute a series of customer the need for a new approach to service training seminars and invested managing AN’s mainline employees.The competitive and HR strategies As part of the new way of doing thing’ pursued by AN mainline business in demarcation between craft group. Clive warren and Elizabeth Hoffman undertook to ‘open the books’ to the union and established team briefings and regular. Emphasize to our manager that they senior management held major must give up control if our employees training programmes. The ‘We must senior management also developed a strategic partnership’ with the unions. CORPORATE Differentiation competitive strategy Corporate values LEVEL recognizing the contribution of Air National employees Effective voice for human resource at this strategy table HUMAN Priority given to security of employment Investment in RESOURCES workplace learning competitive and equitable pay POLICY LEVEL policies Broad taskWORKPLACE design and self-managed teams emphasis on LEVEL employee empowerment and self-accountability climate of cooperation. ‘The hard part robots. people are our most important is having to share power. presentation. and staff were organized are congruent with an HR strategy into teams of multiuse killed that emphasizes employee operatives led by team leaders. Even empowerment and commitment. As those middle manager who supported Clive warren started in a television to managing their subordinates interview. A profit-related pay Group 4 Group 5 system was also launched. are to improve their performance’(Exhibit 2. 1 confess. At the onset of the restructuring process. commitment and trust . Elizabeth Hoffman.2). as one maintenance where there are no assembly lines or manager acknowledge. I asset and our long term survival like to be able to say yes or no without depends upon how they work as part having to confer all the time and seek of a team ‘In the closing part of her consensus from the team. with the Europe Domestic full support of the unions. in training and development. format consultation meeting with union representatives. In addition. uncomfortable.

Between 1996 and 2000. on the importance of trust. concurrent objective of cost reduction. What factors enabled AN’s senior management to take a strategic Go approach jet competitive and human to its business and to adopt an empowering –development resources approachstrategy to HRM? AN 2alsoHow launched useful its go concept is the jet product in of strategic choice ‘in understanding the November 2002 to take advantage of linkage between AN’s competitive and HR strategies? the dramatic shift by European and 3 What North problems. The counterparts at AN. Go? jet planes have more sets because there is less room between the seats and the business- class section has been . do passengers you envisage with AN’s HR strategy and go towards jet’s HR discount strategy airlines.Designed and delivered by leading business school academics. which allows the planes to developments was the company’s carry an additional 20 passengers. Prepare a written report on the following management question. Clive warren requirement to sustain and improve considered that AN had been performance in the face of such job ‘transformed by losses produced. ‘throwing money at the You are an HR consultant problem’ employed a 1. nearly 25 per those of AN’s comparable mainline cent leaving in 1998 job cuts were flights party because go jet employees managed entirely through voluntary will be paid a lower wage than their severance and redeployment. however. training consultant and by arrival national airline to investigate employed development . Assignment Disputes You aretoanjob HRsecurity. motivation and ‘visionary’ leadership. a preoccupation with productivity levees. Running parallel to these Removed. American if any.and through senior AN’s competitive and HR strategy. and attempts to after shift pattern some time provoked conflict. AN shed 37 Go jet will be 20 per cent lower than per cent of its workface.

‘If we are to maintain our market share in domestic and international passenger traffic we have to have business plan . The company aircraft were flying to 164 destination in 75 countries from 16 UK airport.AN went into profit in the first quarter of 1998 and than suffered a loss in the last quarter of 2001 and the first quarter of 2002. Deep in debt in the late 1980s. Re-engineering. that recognize realities of airline travel in the 21st country .‘said warren.