History Of Commercial Aviation

History Of Commercial Aviation. Read the article The Birth of Commercial Aviation (Links to an external site.)Links to an external site. from BirthofAviation.org. Submit a discussion post to answer the question: What impacts did the established Contract Air Mail Routes (CAM) have on today’s commercial airline route structure? Reply to at least two of your classmates’ posts.

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History Of Commercial Aviation

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The Effects Of Deregulation On Aviation Safety

The Effects Of Deregulation On Aviation Safety 

Summary

Deregulation of commercial transport has been in effect for over thirty years in many countries across the world. Airline sector deregulation began in the year 1978 with the United States of America. It has been thought that the recent rash of near misses, blown jet engines, and airliner crashes has heightened fears that deterioration of airline safety has risen as a result of airline deregulation. However, this subject has amassed debates of both the support side and opposite side. Even under these arguments, it is clear that deregulation on aviation safety has had serious negative effects affecting the industry. There are various effects considered in understanding the implication of aviation safety deregulation. These effects are listed throughout the essay and research work done. Air fatalities and near misses is one effect that has brought about mixed reactions of the effects it has brought in regard to safety in the aviation industry. Another effect is the enhanced air safety record. This effect paints the picture that though more air travel has risen; opportunities of plane crashes and safety incidents have also risen. An additional factor to consider is the safety of new entrants. New entrants into the industry in the era of deregulation came with profit maximization at the expense of safety measures. Lastly another effect in regard to effects of aviation safety after deregulation is media focus. Media focus paints the actual picture of any incident occurring over safety maters in aviation. This makes its clear for the members of the public to comprehend the magnitude of effects. Generally, aviation safety after deregulation era has deteriorated and amicable procedures should be adopted to improve aviation safety procedures in the era of deregulation.

 

The Effects of Deregulation on Aviation Safety 

Introduction

            Over the past thirty years, deregulation of commercial transport has been initiated in many countries across the world. The deregulation wave began with United States of America Deregulation of the airline sector in the year 1978. This was meant to be effective as from January 1979. Some countries that have successfully deregulated commercial transport include the Great Britain, United States, New Zealand and some other European countries (Golich, 2008). Following the recent rash of near misses, blown jet engines, and airliner crashes has heightened fears that deterioration of airline safety has risen as a result of airline deregulation. The general public and policy makes are being convinced that national airline systems are not working now despite their effective performance under economic regulation era (McKenzie, n.d). 

            Critics argue that airliners should be reregulated to guard the public from ill-centered motives of profit maximization by investors. Proponents of deregulation have reacted to these charges making it clear that safety has not been impaired be policies providing deregulation. They have gone further to site evidence that on the contrary to made propositions, deregulation has brought about steady decline in death rate as a result of airline safety (McKenzie, n.d). Research proves the fact that death rate as a result of airline deregulation has fallen following 1978 deregulation policy. However, there has been a downward trend of death rate since early days of commercial aviation (Elvik, 2006). The underlying question remains: Has airliner deregulation substantially affected the downward trend in regards to airline death rate? This essay will focus in answering the question citing potential effects of deregulation in the commercial aviation and airline safety.

Deregulation of commercial aircraft transport: What it is and what it is not

            Deregulation of a business may be described as the general removal of underlying formal regulations deterring entry to the business, allowing the freedom of market forces of demand and supply. In a regulated environment, entrant of new firms in the industry is allowed only after applying a public regulatory agency to be allowed a permission to operate. Regulated business enterprises are also majorly characterized by price controls. The main essence of airline transport deregulation is to enforce competition (Elvik, 2006). At the event the industry is defined by perfect competition then the consumers stand to enjoy maximum benefits. A deregulated airline transport normally continues to bare various regulations, including the following: the anti-trust laws, exhibiting prohibition of price collusion threatening acts to monopolize the industry; safety standards for aircraft and their actual maintenance; and safety regulations regarding operation of the traffic such as air traffic control, minimum possible spacing between aircraft (Elvik, 2006). In this background let us discuss effects of deregulation of airlines on safety as follows: 

Air fatalities and near misses

            Throughout the current period where there have been records of rapid expansion in air travel, airline fatalities numbers has had an upward trend. The death toll as a result of airliner crashes ranged from a high of 460 during 1974 to a low of 7 during 1986 (Golich, 2008). Special cases in the early days of deregulation of large plane crashes accounted for some death fears but not severe as during deregulation. Good examples were the 1979 Chicago large plane crash and the 1982 New Orleans plane crash. On average, the total number recorded over airliner fatalities fell sharply per billion passenger-miles (McKenzie, n.d). The actual numbers ranged from 1.19 between the periods of 1972 to 1978 to an average of 0.48 between the periods of 1979 to 1986. Despite the fact that the rate of air fatality were substantially improving, the underlying situation with near misses was a mixed scenario. Restraining from adjusting the air travel volume, the number of recorded near misses increased from 231 during 1972 to approximately 840 during 1986 (Moses & Savage, 2005). 

Despite the exception of a dramatic dip between 1981 and 1982, the total number of near misses substantially increased steadily as the total number of passenger-miles flown was increasing. The total number recorded over near misses per billion passenger-miles, rose sharply between the periods of 1972 to 1978. The total number fell dramatically during the early 1980s only to portray a rising trend approaching mid-1980s. The average rate of near misses was recorded as two per billion passenger-miles in the period between 1972 and 1986 (Gesell & Farris, 2002). This was a picture painted by the early days of deregulation of aviation sector in respect to airline safety. It is worth noting that data related to near misses stand highly sensitive to any reporting system, as Federal Aviation Administration officials ended up acknowledging. For instance, between the periods of 1968 and 1971, airlines involved in instances of near misses were accorded immunity from punitive action at the event they were reported to Federal Aviation Administration (Elvik, 2006).

Over this period, the number reported as a result of near misses averaged 1620 per year. During 1972, after the provisions of immunity expired, the total number recorded as a result of near misses fell to approximately 231 cases. It is assumed that the substantial drop in the total number of available air-traffic controllers after lying off strikers may have accounted for the unusual decline in recorded near misses between 1981 and 1982 (Moses & Savage, 2005). However, information in regard to near misses incidence is regarded very sensitive to the congressional and media attention. As result of airline deregulation, air fatalities recorded a downward trend substantially whereas the rate of near misses incidences portrayed a rising trend. This is one effect with a direct implication on airline safety and cannot be assumed under all circumstances (McKenzie, n.d). 

The enhanced air safety record

It is evident that airline deregulation has come with one overwhelming effect: it has significantly enhanced and increased air travel. In the year 1988 alone, air travel through the major airlines stood at 41 percent. This can be well as expressed as approximately 100 billion revenue passenger miles way above the value predicted through the trend established in periods before deregulation, say 1955 to 1978 (McKenzie, n.d). However, despite this underlying dramatic increase in the volume, improvements in air safety appear to be unaffected the whole process of airline deregulation. Despite all this, there are theoretical arguments facing both sides of paramount airline safety equation. On one side of the argument, the safety of air travel may have been beefed up since deregulation because airlines have brought on stage safer aircraft especially the jet kind. In addition to that, procedures regarding maintenance have relatively advanced withy increased experience in the industry. Nonetheless, safety was never deregulated in the first place (Elvik, 2006). 

In actual sense, it is only the processes and operations of CAB which were discontinued. The Federal Aviation Administration on its part has continued to exist and operate. This existed despite the fact that nearly 10000 air traffic controllers who participated in strike during the year 1981 were all fired; majorly throughout 1980s there were relatively fewer controllers to handle and manage the rapidly growing volume of air traffic (Elvik, 2006). On the other hand, vivid arguments undermine the fear that deregulation could relatively deteriorate safety of air travel. Making the assumption that airlines upheld greater safety standards than the provisions made by Federal Aviation Administration required when airlines were under CAB regulation, then it is sound to think that fare competition after deregulation era could have made airlines to concede some of their safety margin. The truth of the matter is deregulated airlines fly higher number of planes more fully packed with pilots who out of increased demand, bare less overall cockpit experience (McKenzie, n.d). 

Due to exceeding pressure from price competition forces, some airlines have made attempts to impose controls over costs by continued operation of older planes. Other airlines in the industry might respond market competition by bending safety procedures. The outcome that emanate from this is that airlines enjoy reduced operational costs and thus able to lower flight fares to stand the competition. Under the environment of deregulated skies, increased number of airplanes is a direct translation of increased opportunities of accident incidents. This is likely to derive a situation of more fatalities and accidents (Moses & Savage, 2005). 

The safety of new entrants

            In understanding safety underlying issue, it worth discussing death risk per flight, of all-jet airlines before and after deregulation era in the year 1978. Researchers concluded that due to the higher-than-normal number of reported incidents of accidents by new entrants in the nineteen, deregulation process reduced the overall U.S. air travel safety. Researchers’ claim is that, deregulation has essentially done nothing to increase safety procedures amongst established carriers in essence (Elvik, 2006). The official near misses count does not actually depict the actual situation since they are inherently imprecise and flawed measure. It bases its arguments on the judgment of crew or pilots, is greatly correlated with either actual media attention or midair collisions to near misses. It is assumed that this sis related to the underlying threat of penalties to pilots mentioned in incidences of near miss reports. This also factors count of near misses facing all forms of air transportation (Elvik, 2006). 

Researchers argued that, had deregulation never initiated, the overall death risk measure would have remained roughly 1 in 11.8 million air travel passengers. This is simply to imply that, risk would have solely been determined by the rate of accident of the established airline (Gesell & Farris, 2002). By considering a case where death toll risk of thirty-seven airlines considered stood at 1 in 7.4 million spread over the period of deregulation. It therefore follows that it is sound to assume that deregulation raised by approximately 60 percent the actual average risk per flight for the overall domestic airline travel. Many individuals and studies stand to argue that accidents and fatalities are often the product of crew and pilot experience (McKenzie, n.d). Research indicates that overall flight experience has significant learning effect. It is held that increase in underlying airline experience by about one billion miles has a direct implication of reduction of the accident rate by about 14.1 percent. Despite this finding is based on study of existing airlines before deregulation in 1978, this explanation can greatly help understand the above-average accident rate for new entrants in the airline transport after 1978 (Moses & Savage, 2005). 

Generally, an assumption is made that due to the fact that deregulation permits route and price competition, profits in regard to the industry and hence the safety has suffered in return. However, airline competition was not entirely suppressed before imposition of deregulation policies, only the routes and process were controlled. We cannot underpin entirely the possibility that deregulation is likely to have substantially substituted price competition for overall safety competition. It is evident that in the era of deregulation, safety might have been marginally sacrificed to deliver improved movies and meals (Elvik, 2006). With deregulation, higher efficiencies could have derived less emphasis on the actual visible forms of competitive age other than price competition and over emphasis on less visible safety competition forms. Several researchers established that substantial market penalties are imposed over accident and lapse of safety standards set by airlines. This overall effect is said to have been enhanced over environments of deregulation. It remains an open ended question whether airline deregulation process marginally decreased or reduced the amount of total resources devoted to airline safety procedures by relevant safety agencies or even by airlines themselves (Moses & Savage, 2005). 

Media Focus

            The continued persistence of public complaints over safety procedures in aviation can also be partly explained through the old adage. The old adage made the general proposition that a picture is worth a thousand words in meaning and explanation. The media has continued replayed television footages of fiery plane crashes. They have been at the fore front in giving descriptions regarding plane cleanup efforts. The truth of the matter is that victim counts often bare more effect as compared to several million words over a plane crash tragedy (McKenzie, n.d). This is because reports are compiled in difficult to comprehend formats of statistical reports in regard to the impacts of aviation deregulation. A perfect case on point is the highlight of the December 1990 attention on the collision of the two Northwest jets on a runway. This happened in Detroit and about eight people died over the incident and approximately twenty others sustained serious injuries. The next morning Detroit News, banner headlines were set bold and large enough to draw attention (Elvik, 2006). 

            In general, almost every paper across the country bore the pictures of the severe burned-outs DC-9. The dailies also heavily recounted leading story of the pilot, who have just been reinstated into the workplace after five-year absence due to medical leave. In this incidence, he had become lost in the dense fog that had covered the entire runway leading to the near miss. This was clear that many people reading the story line posed their thought over larger numbers of people killed in Michigan roads. This recurred itself in every weekend through 1990 than the actual number succumbed on the Detroit runway on such fateful day (Golich, 2008). Media focus makes readers generate a mindset and picture of an incidence in an intense way. However, they have their part to play in informing about safety incidents in airline transport. Since deregulation, more reported safety incidents have been recorded and media has helped to inform the public about them. Media focus highlight every incident as thus paint the actual picture of the underlying situation regarding safety in aviation after deregulation procedures (Elvik, 2006). 

The general improvements of safety over air travel has not been slowed and paralyzed by the deregulation of air fares and routes. The underlying problem that is worth mentioning is actually caused ordinarily by the governments’ failure to offer deregulation over the entire system of air transport. This includes even the system of the air traffic control. The media focus has been on the lime light painting the actual picture the situation revolving around airline safety. Although, authorities make efforts of curbing the spread of information regarding airline safety, media focus has greatly contributed to inform members of the public (McKenzie, n.d).

Conclusion

            In conclusion, airline safety after deregulation approximately over thirty years ago has deteriorated. Airlines have majored in other forms of competition to survive the market at the expense of passenger safety. Resources have been drifted to address other forms of none-price competition underpinning safety. Despite the fact that deregulation has brought with it coopers benefits to airlines, safety procedures are paramount and should not be shortchanged. Reinstatement of safety procedures regulation should be imposed to control air traffic safety. This essay has been focusing on citing potential effects of deregulation in the commercial aviation and airline safety.
 

References

Elvik, R. (2006).Deregulation and transport safety: A synthesis of evidence from evaluation studies. Institute of Transport Economics. 

Gesell, L. E. & Farris, M. T. (2002). Airline deregulation: an evaluation of goals and objectives. Transportation Law Journal, 21, 105-127.

Golich, V. (2008). Airline deregulation: economic boom or safety bust? Transportation Quarterly, 42, 159-179.

McKenzie, R., B. (n.d). Making Sense of the Airline Safety Debate. Regulation. 76-84.

Moses, L., N. & Savage, I. (2005). Aviation deregulation and safety: Theory and evidence. Journal of transport economic and policy. 171-187.

 

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A Comparison Of Business Models Adopted By The Aviation Industry Companies: A Case Of Rolls Royce, General Electric And Pratt & Whitney

A Comparison Of Business Models Adopted By The Aviation Industry Companies: A Case Of Rolls Royce, General Electric And Pratt & Whitney

Contents

Abstract 1

1.0 INTRODUCTION.. 2

1.1. Background/Overview.. 2

1.2. Problem Statement 3

1.3. Significance. 6

1.4. Aims and Objectives (Research Questions) 8

1.5. Scope of Project 9

2.0 LITERATURE REVIEW… 10

2.1. Background of Aviation Industry. 11

2.2. Current Trends in the After-Sales Service for Aero Engines. 15

2.2.1. Innovative Business Models. 15

2.2.2. Collaborative Business Practices. 17

2.2.3. Forecasting and Simulation Models in the Aero Engine Industry. 20

2.2.4. Modern Models of Business among Airlines and Aircraft Framers. 22

2.2.5. Recent Aerospace Industry Models. 25

3.0 METHODOLOGY.. 28

3.1 Introduction. 28

3.3 Research Context 34

3.4 Participants. 34

3.5 Data Collection. 35

3.5.1 Questionnaire Items. 37

3.7 Data Analysis. 38

3.8 Limitations and Potential Problems. 39

4.0. CHAPTER 4: RESULTS. 41

4.1. Introduction. 41

4.2.0. Companies Profiles. 42

4.2.1. Rolls-Royce. 42

4.2.2. General Electric. 44

4.2.3. Pratt & Whitney. 45

4.2. 0. Services after Sales and ISO Standards. 46

5.4. A Comparative Analysis from the Automobile Industry Standpoint 65

5.5. Implications of the Study Findings. 69

6.0. CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS. 71

6.1. Introduction. 71

6.2. Conclusions. 73

6.3. Recommendations. 77

References. 78

Abstract

This research study set out to investigate and comparatively analyze the services after sales accorded to aero engines customers by three leading aero engines manufacturers: Rolls Royce, General Electric and Pratt & Whitney. In essence, this entailed improving the existing knowledge on how to go about the management of operations and after-market support involving aero engines.This was occasioned by the apparent state of dilemma among high technology aerospace companies on how to regularly supply the demand of their clients in the face of numerous industry-specific and marketplace challenges. Basically, the study revolved around how aero engines manufacturers can improve and consequently expand follow-up services after they have made the sales; how aero engines manufacturers can successfully solve the pertinent problems of sustaining customers not within the company’s branches; and most importantly, how aero engines can satisfy both their customers and employees. To this end, the study utilized a qualitative methodology where three levels of data collection were employed, that is, interviews, questionnaires, and direct retrieval of data from the companies’ official websites as well as other authentic sources. The analysis of the collected data made thereof culminated in the grand findings that the aero engines market is unequally distributed among players, with the three study companies occupying the ultimate top positions in the industry. Moreover, it was found that a significant percentage of the three companies’ total profits is made from the services after sales it accords to their aero engines customers. Conclusively, the study holds that well structured and coordinated services after sales positively impacts on a company’s overall competitive advantage. Even so, due to few inevitable validity snags, it recommended that future studies that will involve both lower-end and upper-end companies sin the aero engines industry might help to give industry-wide findings.

A Comparison Of Business Models Adopted By The Aviation Industry Companies: A Case Of Rolls Royce, General Electric And Pratt & Whitney

1.0 INTRODUCTION

1.1. Background/Overview

Recently, a number of interesting aero-engines after -service business and production models have been developed and it is worth the time and effort to examine them for their effectiveness and efficiency in terms of ease of implementation, cost factors, and availability of technology, among other considerations. Scott, Hedenryd, and Buxton (2005) opine that the scope of aftermarket services business model is multifaceted. It incorporates a whole host of services that includes; aero engine maintenance, development and implementation of aero engines management systems, development and installation of customer care and facing systems, development and installation of system software that supports market-related data transfer and analysis, and creation of health sustenance solutions to potential organizational and market-related operational eventualities. Moreover, a closely structured and monitored after market services initiated by the aero-engines industries and adopted by both the aircraft frame builders and airlines will entail a shared marketplace environment that enhances efficiency in the manufacture of aero engines parts, aircraft frames, as well as timely repair and maintenance of such (Stranjack, et al 2008). It is therefore not a surprise that the new after market services business model for aero engines is the focus of scrutiny of aviation decision makers and original parts manufacturers today (Kerr & Ivey, 2001).

After market services are meant to build strong and sustainable customer bonds that in the long run play a huge role in reducing the overall costs of operation while still maintaining a strong market foothold. In extension, well coordinated after market services are handy in inducing relevancy on the information and instructions given to customers by the OEMs through the timely and quality delivery of services (Saccani et al 2006). In a nutshell, after market services help to create a sustainable bidirectional communication system that not only quickens the pace which information is relayed but most importantly it helps to impart meaning and purpose to such information (Farris et al 2005).

1.2. Problem Statement

There are many competitive concerns being faced today by the global commercial aviation industry and, consequently, by the aero-engine spare parts industry. These two industry sectors actually are interconnected by complex relationships.  There are some problems plaguing the aviation industry. Buxton, Bart, & Wang (2007) have alluded to the existence of stiff price competition in the aero industry. This is true in any industry as well, but it is more acute in the aero engine industry since parts are highly specialized, costly to manufacture, and entail a lot of development costs in their life cycles (Kerr & Ivey, 2001). While there are big players in this industry, because of the recent global financial crisis, most airline companies have halted orders for parts, and these led to a turbulent aviation industry. These are the downsides. However, there are also opportunities, like a rapidly evolving industry because of advances in aviation technology, and the use of information and communications technology.

Fuel costs of aircraft engines have gone up, thus, the need to reduce operating costs and yet it could not be done because the development cycles of aero-engines are long and costly. The search for new business and operation models has become a necessity for the sector to navigate the future successfully. Hence, according to Buxton, et al (2007), in order to be competitive, airlines have developed new business and production models such as what they call as the “virtual airline” where passengers can just book their flights online, and where airline operations are conducted virtually, enabled by ICT (Information and Communication Technology) and cutting edge aerospace technologies. These kinds of changes going on in the industry necessarily demand that the service companies should likewise need to adjust if they want to say in the market. Buxton, et al (2007), talk about another business model worth looking into which is that of the “business aviation group”. This is an organizational restructuring forged by cooperative partnerships with other aviation companies. Why the need to search for new business models? We realize today that global markets are rapidly changing, and technologies are likewise evolving. If companies do not keep pace, they will be left behind in the competition.

Considering these changes in business models, in organizational set up, changing technology, and in business operations, the aero-engine manufacturing companies are left with no choice but to respond to these changes by creating new business models, no longer that of being in the delivery of products, repairs and overhaul business, but they now call themselves as service companies. This means that they are no longer merely spare parts companies, but they offer after sales service. This is an interesting development in this kind of industry under the bigger market: the aerospace industry. For instance, Scott, Hedenryd, and Buxton (2005) postulate that the desire to venture into closely monitored after market services among aero engine industries, particularly the major ones such as Rolls Royce, General Electric and Pratt and Whitney is occasioned by the changing aero engines technologies. Precisely, the shifting from revolutionary to evolutionary gas turbine technology has occasioned the need fro OEM their customers (airframe builders) to form joint ventures. Such as joint ventures help to eliminate undue competition, maximize gains from emerging technology and hence considerably cuts down operation costs while still staying competitive. In essence these joint ventures are a form of after market services especially when approached from the aero-engines industry point of view (Steffens & Hollmeier, 2009).

Moreover, the complex nature of the aviation industry brings the services of all the key stakeholders together such that it is very difficult for each of the stakeholders to perform independently. As a matter of fact, Scott, Hedenryd, and Buxton (2005) argue that engines are responsible for a significant chunk of savings for both the OEM and their customers every time a new technology is unveiled. Furthermore, given that the efficiency of an engine, its overall costs of maintenance as well as its lifespan directly impacts on both the aero engine manufacturers and airline operators. This is because the aviation industry is unique from other forms of marketplace businesses particularly when looking at it from an aero engine point of view. In essence, aero engine manufacturers are situated at the lower end of the aviation industry – they sell their engines to aircraft frame makers who in turn sell the fully developed aircrafts to the airlines (Buxton, Farr, & McCarthy, 2006). Even so, they participate in the negotiation of final prices as well as the maintenance of products making it possible to maintain a commanding marketplace presence (Doganis, 2001). In a nutshell, the aviation industry is directly dependent on the aero engine manufacturers and therefore a new business model that seeks to join all the stakeholders together will definitely enhance competitiveness at the marketplace.

The aero engine sector of the broad aviation industry is a long term investment industry where investments may take as long as 30 years to break even. Moreover, a lot of funds are also required to sustain the numerous processes in the manufacture, installation, maintenance and servicing of aero engines (Buxton, Farr, & McCarthy, 2006). Therefore the establishment of sustainable after market services serves to bring together the industry players and most importantly the pooling of resources, hence economies of scale (Mabert, Ashok, & Campbell, 2006). Again, basing on the complex nature of the aviation industry it can be argued that the competitiveness of aero engines in the marketplace cannot be fulfilled by one stakeholder (Farris, et al 2005). Precisely, the core competitive features such as cost efficiency, environmental friendliness (cleaner, quieter, and fuel-efficient), relationship building, weight reduction, and overall engine efficiency/performance cannot be fulfilled in by the aero engine makers alone (Scott, et al 2005).

1.3. Significance

Companies that are engaged in highly-specialized production of spare parts that are supposedly marketed globally are, presently, in a dilemma on how to be able to regularly supply the demand of clients. This paper would be very significant primarily to aero-engine companies worldwide, such as the Rolls Royce Company, General Electric, Pratt and Whitney, and the MTU Aero Engines. However, other beneficiaries would include offices and individuals that are into management, marketing, and to those interested in improving the overall sustainability of their company. Essentially, the airline industry is not the only one involved in the system of aero-engine operation but there are a whole lot of actors in the playing field. Original equipment manufacturers (OEMs) are equally crucial and, recently, have played a major role in increasing the total cost. There are the clients and manufacturers. Each actor in the playing field contributes to the overall operation but, presently, the aero-engine operation is beset with numerous problems.

It is envisaged that after market services that incorporates the maintenance, repair, and overhaul (MRO) of aero engines as well as other critical parts of an aircraft goes a long way in instilling efficiency in service delivery. This postulation derives its impetus from the notion that business entities should always endeavor to align their services with prevailing marketplace trends so as to remain competitive. Again, contemporary business environments are crowded with all manner of technological complexities beckoning business entities to switch on new and efficient operations models. Precisely, airlines that have proper MROs are bound to incur minimal expenses particularly when it comes to the overall costs of servicing their aircrafts. From an industry-wide perspective these MROs are initiated by aero-engine manufacturers and other OEMs. Apparently, these MROs are responsible for between 10 percent and 15 percent of the overall airline expenditure explains its criticality in shaping marketplace positioning and leveraging of the OEMs, aircraft frame builders, and airlines (Knotts, 1999).

Precisely, Roll Royce, General Electric, Pratt and Whitney as well as other major aero engines players have close after market services partnerships with major aircraft frame builders and airlines (Scott, et al 2005). However, the extent which each of the companies pursues after market services is yet to gain substantial attention from researchers. In this regard it is envisaged that this study will provide comparative empirical data on the extent which each of these three companies indulges its customers in after market services when juxtaposed against industry and marketplace benchmarks.

1.4. Aims and Objectives (Research Questions)

The aim of this dissertation is to make a comparison between three aviation industry companies: Rolls Royce, General Electric and Pratt & Whitney in terms of services after sales for aero-engines that they offer to their customers. To achieve this, information will be sourced the companies’ official web sites as well as a range of other authentic sources which include journal articles and textbooks. In addition, the comparison will also involve ISO standards that each of the company use in the overall delivery of their services after sales. To this end, a SWOT analysis will be carried out for each of the three companies so as to facilitate a sound an ‘industry and company-specific’ comparative study.

Lastly, efforts will be made to obtain the optimum services after sales for the three aero-engine companies with view of juxtaposing them against similar services offered by companies in a closely related industry. In this regard the automobile industry will be the most appropriate. At least one automobile company with a commanding global marketplace presence and evidential services after sales will be used.

In doing this the thesis will be aiming at improving the existing knowledge and system on how to go about the management of operations and after-market support involving aero-engines. Tellingly, the discussion is made much more reflective by my experience in engineering which I have gained from previous degree and experience in the work-field. Specifically, this essential aim is further refined by the following practical objectives: (1) to assist aero-engine companies in improving and expanding services after they have made the sales; (2) to help aero-engine companies find solutions to the problem of sustaining customers not within the company’s branches; and (3) to find appropriate ways to satisfy both the customers and employees of aero-engine companies.

1.5. Scope of Project

The after market services competitive business model discussed in this dissertation will assume Olsterwalder, Pigneur, and Tucci (2005, pp. 17-18) point of view. Precisely, it will seek to give a detailed account of the value aero engines industry “offers to one or several segments of customer and the architecture of the firm and its network of partners for creating, marketing and delivering this value and relationship capital in order to generate profitable and sustainable revenue streams.” Ideally, the dissertation will embrace the four-pillar framework of product, customer interface, infrastructure management, and financial aspects as envisioned by Olsterwalder et al (2005) “Nine Business Model Building Blocks” in Table 3 (p.18). In this regard the four pillars will be discussed in the context of aero-engines industry. In a nutshell, the pillars will be delineated in view of eliciting value creation and sound customers relations methods among the aero-engines, aircraft frame builders, airlines operators, as well as other industry specific stakeholders. [Table 3 is in the Appendices]

1.6. Definition of Terms

OEM – original equipments manufacturers

ISO – International Organization for Standards

GE – General Electric Company

ICT – Information and Communication Technology

MRO – Maintenance, Repair, and Overhaul

2.0 LITERATURE REVIEW

In trying to review the existing literature, this dissertation will adopt the four-pillar approach as outlined by Osterwalder, et al (2005) in their “nine business model building blocks” structure (p.18). This will be necessary as it will induce a sense of focus and direction to the review and hence limit it to the study topic. In this regard the review will be limited to literature on the products offered by airlines industry; how the industry stakeholders go about creating interactive customer interfaces; the key strategies employed by the industry players the management of interactions infrastructure, and; the core financial management tools employed by the industry players to maximize profits while keeping costs at manageable levels.

The aero-engines industry for instance is a unique industry in that, it entails large sums of capital to manufacture aero-engines, to build aircraft frames, to carter for fuels and labor expenses, as well as taxes paid to domestic and foreign governments for using their airspaces (Almeida, 1997). The high amount of capital may be prohibitive to industry players particularly during hard economic times. For instance, to fully assemble and equip an aero engine with the necessary parts and components requires more than $35 million while assembling a 7 x7 aircraft frame may costs a whopping $250 million. By fair terms these are relatively high costs which need to be distributed among a number of industry players so as to cushion the eventualities of shocks and risks.

These costs may even be much higher particularly if the aircraft fail to reach its minimum operation lifecycle due to marketplace as well as natural calamities (Buxton et al 2006). In fact, it is known that aircrafts are prone to all manner of risks that range from human to natural catastrophes. For instance the industry is highly affected by extreme heat, extreme cold, fog, volcanic emissions, and hailstorms among other severe environmental conditions. Moreover, it is true that unlike automobiles, aircrafts undergo rigorous and regular maintenance and inspection. This is necessary as a small hitch on an aircraft can cause immense losses as opposed to the case of automobiles that can be fixed in the middle of a journey in the event of a breakdown (Farr, 2006).

2.1. Background of Aviation Industry

Two major events in the aviation industry in the United States have serious repercussions in the aviation businesses. Firstly, Scott et al (2006) and Buxton et al (2006) agree that the airline industry is faced by a barrage of financial and operational challenges. Apparently, the industry faces these challenges at a time it is being ‘weaned’ from the close support it used to enjoy from the domestic governments. As a matter of fact, the state coffers have over the past been used to cushion the airline industry from marketplace challenges such as financial crunches as well as cut-throat competition. This is a trend that can be attributed to major airlines considered as national flag carriers that have in the past not exposed to the marketplace vulnerabilities. In the US for instance, an estimated $5 billion were distributed to a number of major airlines between 2000 and 2003.  This was mainly done to prevent the airlines from going into bankruptcy as stipulated by the provisions of Chapter 11 of the US Constitution (Scott et al, 2006).

As such, there is no doubt that the state financial and administrative leverage played a huge role in streamlining the airline industry. However, this trend is slowly changing particularly following the realization that the “Over-capacity and low yields lead to instability and the effects of any disturbances within the global economy cannot be absorbed” through bailouts (Buxton, et al 2006, p.2). Needless to say this is a wakeup call to airlines as well as other major players in the industry to adopt more competitive and cost effective business models as a practical solution to the overreliance of support from the public coffers.

The other major event was the famous “September 11terrorist attacks” (Thompson, Strickland, & Gamble, 2003: C-644). Because of low airline traffic, airline companies were financially affected so much so that many airline firms went into downsizing, cancelling orders of additional aircrafts, cutting down number of flights, went into borrowing money to cover cash trapped coffers, and as a last resort, filed for bankruptcy. It was a dark period in the history of U.S. aviation which also affected the aviation global business landscape. On top of this, the 2008 global financial crisis caused great financial crisis to the commercial aviation industry, still reeling from the after effects of the terrorist attacks. Such was the scenario in the last decade in this highly technical industry (Thompson et al 2003).

 A combination of these two major events as well as a gamut of other marketplace impediments threatens the smooth operations of the airline industry and in particular the MRO aspect of the industry that apparently is directly responsible for between 10 percent and 15 percent of the overall airline expenditure (Knotts, 1999). Bearing in mind that the aero engines are the aerospace industry drivers that creates revenue for all the stakeholders through the normal “engine flight hours (EFHs) and engine flight cycles (EFCs)” as well as maintenance and consumables whilst in service” there is a great need for aero engines to collaborate with aircraft frame builders, airline operators as well as other ancillary services providers (Buxton, et al 2006, p.4).

These collaborations may take the form of a complete or partial reinvention of their various ways aero engines industry conduct their business activities. Admittedly, the changing business scenario calls for drastic changes in the aero engine business models. No longer competitive by merely just trying to deliver products, conduct repairs, and go into overhaul, the industry has to explore new business approaches if it desires to be globally competitive. The industry has to adopt the changing market place and realities and adopt fast (Steffens & Hollmeier, 2009). This kind of reflection on past business models, to determine which worked well or did not work, or even which should be re-invented or re-engineered must preoccupy aero- engine management nowadays if it desires to exploit market opportunities and take new directions on how to compete in the future.

 In light of the above discussion, new and interesting directions suitable for the industry strategic positioning can be advanced. These are: “drastic reduction of new engines development and production costs; revision of the value- added chain; consolidation of the industry and entry into cooperative programs; and product differentiation through innovative technologies” (Steffens and Hollmeier, 2009). In addition, Steffens and Hollmeier suggest outsourcing MRO and engaging in strategic alliances with other corporate partners in the industry.

 Let us take this one by one. In terms of drastic reduction of new engine development and production costs, there is a need to be cost-effective in coming up with new aero engine parts but at the same time not sacrifice quality. Where are the areas where costs can be drastically reduced? These can be done in the variable costs as well as in the production costs.

 Regarding product differentiation mentioned by Steffens and Hollmeier (2009) as one of the strategies to be adopted by the industry, this is affirmed by Porter (1985: 14) who remarks, “A firm seeks to be unique in its industry along some dimensions that are valued by the buyers”. For the aero engine industry, this strategy can be translated as offering unique spare parts after-sales support system. Product differentiation can be a way to be ahead of the competition. When aero engine companies think of innovative and unique products, they are in actuality, trying to differentiate from other similar products manufactured by other competitors. On his part, Johansson (2004) acknowledges that it is true that for OEMs within the aerospace industry as well as other industries to wade through the murky global market economy they must embrace specialization. However, for this specialization to bear the fruits of innovation it needs to be collaboratively shared. In this regard aero engines OEMs, their customers as well as other industry players need to pool together their different specialities in what Johansson  terms as “open and amorphous networks of peers” (p. 257).

On the other hand, the revision of the value-added chain pertains to the life cycle of the product as well as whether the company make some changes either through new technology, or by coming up with some modifications in the whole value chain. Another way is to consolidate the industry and for companies to enter into cooperative programs. Industry consolidation and collaboration will demand that the companies within the industry should find ways to work cooperatively and collaboratively with one another. This is easier said than done. Entering into new cooperative projects involving other companies would mean getting into strategic alliances with them over the long term.

2.2. Current Trends in the After-Sales Service for Aero Engines

2.2.1. Innovative Business Models

Mabert, Ashok, and Campbell, (2006) identify a new source of income for the commercial industry that can be a source of competitive advantage. Farris et al (2005) likewise provide the aftermarket support practices and directions as well as the greater opportunities for supply chain management. Mabert et al (2006) pointed out that it is in “aftermarket support” that the opportunity to reap profits will emanate, not in the initial sales of spare parts for the aircraft. This is a radical way of thinking of how to compete. To think that they are an “after support” company, rather than just a company that delivers spare parts. Precisely, collaborative services between aero engines OEM, aircraft frame builders and airline operators should not only involve the conventional settlement of customer claims and warranty fulfillment, rather it should be holistic. It should encompass regular maintenance and overhaul services, procurement and timely delivery of spare parts, as well as other contract-long customer engagements. Such holistic after sales services are beneficial to both the end product companies as well as the OEMs. For instance, General Motors Corporation recently registered a huge profit from its $9 billion worthy of after sale services when compared to what it got with its $150 billion sales from its wide range of automobiles (Viardot, 2010). Ideally, technology and capital intensive companies have over the years managed to withstand market shocks by staging interactive and contract-long after services sales.

The underlying idea behind success from after sales services is that companies are able to supply their products and make conscious efforts to put in place strong preventive and supportive measures for such products (Bundschuh & Dezyane, 2003). This helps to increase the value of the products sold while also creating strong customer relations for future business. As Viardot (2010) argues it is very easy for firms to find market for its products in segments that it already has strong relations as predicting market needs is easier than it is in new market segments. A case in mind is that of Toshiba where in 2002 the first month sales from warranty fulfillments went up by a margin of 37 percent, with overall sales averaging at 4 percent. The company had embarked on an aggressive drive to initiate an electronic based after sale services for its laptops. The drive entailed prompts to new users requesting them to create a profile that Toshiba used to make critical decision on the effectiveness of a range of warranties it offered (Viardot, 2010).

After-sales service activities in the consumer goods industry depict an orientation to “improve company image, customer satisfaction and retention” (Saccani et al 2006). This is highly important, indeed, and I agree with the authors in pointing out that the focus of companies offering after-sales service tasks should be to enhance the company’s credibility and good image as well as make the customers happy and retain them through customer repeat purchases or their availing of the services. Besides, the after-sales service when done in excellent manner and of high quality would attract new clients. There are only a few big players in the global aviation industry and getting them to avail of the after-sales support service would redound to higher company earnings.

In support of this postulation, a study carried out by AMR Research, Inc. concluded that companies that practice after sales services are bound to realize up to an average of 24 percent in revenues and about 45 percent in profits. Rolls-Royce for instance registered a relatively higher profit margin (55 percent) in 2004 courtesy to its concerted efforts in practicing after sales services. Similar results were registered by Bombardier, another aero engines company where about 80 percent of present net value was recorded compared to 20 percent of the original investment value. Even so, this trend is not uniform across all aero engines and aircraft frame industries possibly due to the features of the after sale services model adopted. For instance, Airbus recorded a relatively low after sales services present net value of about 30 percent compared to its high values of about 70 percent of its new investment (Viardot, 2010).

2.2.2. Collaborative Business Practices

An intensive review of the literature on covering strategies employed by aero-engine companies reveals that they are now into collaborative business practices. These practices are comprised of strategic alliances, revenue and cost sharing practices, and virtual enterprise collaborations, which are enabled by information and communications technology. Scott et al (2006), supports this postulation when they argue that a combination of technical and financial snags pushes the aero engines OEMs into forming joint ventures. As it is now, the few major aero engines OEMs have formed joint ventures an indicator that indeed it is very difficult to survive as a lone ranger. On the other hand, such joint ventures are a blessing to the engine OEMs who pool their resources together and hence avoid the cut-throat market competition. It is indeed true that joint ventures do reduce the amount of profits realized by the individual aero engines OEMs however, given the inherent risks in the aerospace industry aero engines OEMs forming joint ventures gain a reprieve in the form of risk sharing than otherwise it would have been if they ventured on their own. 

Larson et al (2010) acknowledge the importance of forming business alliances among OEMs. They assert that such alliances helps to influence their customers to make use of shared information, know-how, as well as other critical organizational materials. In their arguments they support the formation of Virtual Enterprises (VEs) which they argue accord OEMs an opportunity to choose which areas of their overall operational activities they should cooperate with their counterparts and which areas they should handle alone. A good example of an OEM in the aerospace industry that embraces this model is Rolls-Royce which pursues outsourcing and sometimes even ‘outshoring’ about three quarters of its supply chain management while managing the remaining percentage. Specifically, Rolls-Royce ponders various aspects of the overall assembling of engines such as “… the hot end of the engine, the turbines, the compressors and fans and the alloys… [and determines] how they are made” with view of outsourcing those elements that can be produced by others at a cheaper price (Johansson, 2004, p. 459).

Interactive practices “speed up development cycle times, minimize and reduce product cycle costs”. This is good news for other aero engine companies. They can now hook up with the virtual enterprise collaboration hub through an “engineering portal”. This is a virtual portal that at any moment can be accessed by strategic partners. This is the kind of collaboration that we are looking for in order to make the aero-engine industry globally competitive. It is good to know that MTU Aero-Engines has pioneered in this worthwhile strategic business alliance. If we look at the aviation industry three decades ago, this was not possible. The presence of the Internet today makes many things possible for the industry which otherwise were virtually impossible in the past.

On his part, Hill (1994, pp. 466-467) points out that strategic alliances for global manufacturers are “a way to build trust between firm and suppliers. Trust is built when a firm makes a credible commitment to continue purchasing from a supplier on reasonable terms”.  It can be seen that for the aero-engine strategic alliances, there are advantages that can be derived if the companies adopt this strategy. However, there are also their attendant disadvantages. For instance, (Farris et al 2005) remark, “strategic alliances involve greater risks, dependency, and rewards than do tactical alliances”. Similar sentiments are shared by Buxton et al (2006), when they postulate that an agent-based business model not only reduces unnecessary costs but helps to predict future market trends. However, they are quick to point out that such model needs committed product managers capable of reading through market trends and making sound and timely judgements. In addition they champion for the VIBES (Virtual Interactive Business Simulator) tool that they argue can be successfully intertwined with the agent-based model to come up with new business alliances that can be utilized build future markets. Precisely, they envision a model where “the modeller focuses less on event sequences and instead aims to capture the behaviour of each actor in a system as an agent with a degree of autonomy. Combining these three different modelling approaches together enables complex business environments to be modelled”.

Scott et al (2006) offers that performance among aero engines OEM increases with MRO services – high fliers in the industry are those that embrace proper MRO policies. In explanation they use a scale that shows peak financial achievements at either end of the curved scale. This can be perceived as a support to two of their three business models of ‘virtual airline’ and ‘aviation business group’ they advance in the same work. In this regard it can be deduced airlines practicing ‘traditional business’ models are at a disadvantage as it becomes very difficult for them to compete at a level ground with their counterparts who have embraced new innovation particularly those that involve the delivery of non-conventional and opportunistic services to industry players.

Another model of collaborative business practices that I was able to find in the literature (Steffens and Hollmeier, 2009) is that of the European consolidation along the lines of a European System. They call it the European System Coordination and Management Company. In my opinion, such a European management company may be disadvantageous to the United States aviation industry, though. But I believe that it is a good move to take in order to consolidate and ensure that collaboration is effective and well coordinated.

2.2.3. Forecasting and Simulation Models in the Aero Engine Industry

Because of the uncertainty and great risks entailed in the aero engine industry, companies have tried to develop forecasting and simulation models to predict eventualities related to spare parts planning, scheduling, repairs and overhaul. Marbert et al (2006) mentions a forecasting model for spares demand planning using the SAP Advanced Planning Optimizer (APO) software system. Buxton et al (2006) focus on life cycle cost simulation. Stranjak et al (2008)presents the “Overhaul Prediction Model and Scheduling Tool for simulation of complex aero engine operation”.

On the other hand, the forecasting tool as described by Stranjak when compared with other forecasting models earlier mentioned appears to be powerful in terms of its capabilities to predict whole engine corporate risks, work scheduling, scenario modelling, and conducting “what if” analysis. These are the kinds of forecasting techniques that management need to enable them to mitigate unforeseen circumstances and events. These are statistical techniques that perform simulation and through this process, are able to predict events.

 Another forecasting model is the dynamic modelling technique the – the Global Manufacturing Networks (GMVNs).  GMVNs are virtually volatile organizations that aids in integrating companies so as to enhance the sharing of critical resources.  “The advantages of GMVNs are their being highly flexible system with low barriers to entry and exit, geographic flexibility, low costs, rapid technological diffusion, high diversification, and exceptional economies of scale” (Monroy & Arto, 2008). Geographical flexibility calls for virtual teams deployed in some key areas in the globe that can respond with ease and speed.

But when we use this network, there are risks involved and we have to be wary of them. These are: risk of contract manufacturers developing their own end-products in competition with their customers; the risk of technology transfer, and the risk of losing process expertise. (Monroy & Arto, 2008) I think this can happen when they will outsource manufacturing processes more and more to the network and a memory loss might occur. Caution is therefore called for in this instance.

 Driouchi et al (2008) suggests that dynamic risk management policies for designing and appraising flexibility in service planning and provision should be adopted to allow for better decision making in the face of uncertainties. Dynamic forecasting models are indeed just that, management should have to evaluate the most effective prediction model for the company to adopt. This kind of forecasting technique uses non-linear dynamical models to capture fluctuations in demand and scheduling that cannot be captured by linear statistical models. In addition the authors indicate that “services and products are merging and manufacturers are seeking to grow and protect their profitability by enhancing the service elements of their customer offerings. They give the example of Rolls-Royce “Power by the Hour” contract. Instead of selling aero engines to customers, these contracts enable the customers to pay for the engine capability, based on the hours flown, while the manufacturer retains the responsibility for maintaining the engine”.

2.2.4. Modern Models of Business among Airlines and Aircraft Framers

Drawing from Doganis (2001) work, Scott et al (2006) advance three major business models adopted by major airlines in the world; traditional airline; virtual airline, and; aviation business group. The traditional airline is a major business model that is being pursued by large airlines such as British Airways, Delta, and Iberia. This business model is more or less atypical to the government controlled airline that enjoys immunity from marketplace shocks. Practically, it entails regular and uninterrupted access to air travel services that involves collaboration between airlines where airlines agrees to run connection legs for other airlines within the same operation alliance. Again, through the alliance the airlines make it possible for their clients to book their travel arrangements through a single point even if the travel arrangements covers a relatively large route which is obviously not served by a single airline. A good example of traditional airline model is the star alliance where 18 airlines share codes, marking, airside maintenance, and other relatively low costs services. Basically,  This accords the clients to numerous benefits as it reduces the hassles of flight interruptions, long waits for flights connections, costs incurred in car hires, and most importantly it allows for the cross transfer of air travel points that are calculated based on the number of travels using any of the alliance airlines as opposed to a single airline. The large network of routes also eliminates the chances of flight cancellations and also accords the airlines the opportunity to enjoy the economies of scale hence maximization of profits while still offering other ancillary services such as meals and entertainment for their customers at subsidized charges or even free of charge for some special flights.

According to Scott et al (2006), virtual airline model of business entails exceptionally low prices, a feat that is achieved through concerted efforts to cut down operational costs as well as the scrapping of a number of costs such as in-flight meals and entertainment passed on to the customer in traditional business models. Lowering air travel prices among airlines that practice virtual airline model is also made possible by a relatively “high visibility of support service costs” where the airline only partakes of doing those activities that are absolutely necessary and which it can do with minimal costs and with great ease while liaising with other stakeholders in the industry such as aero-engine manufacturers, aircraft frame builders, human resource consultancy firms, and others in bid to optimize efficiency while keeping the operation costs at a manageable level. Such close business liaison eliminates the notion of fixed costs as it offers costs/prices alternatives for critical services such as repair, maintenance and overhaul of aero engines parts. Some airlines such as the Ryanair of German have already indicated that it will ponder the possibility of offering absolutely free flights as part of its virtual model pursuits. Low air tickets prices compounded with free meals and entertainment goes a long way in building a strong customer confidence and loyalty. Even at the backdrop of economic downturns this business model has attracted significant results among airlines that have been practicing it.

Graf (2005) supports this business model when he holds that airlines that have been practicing this form of business model are cable of realizing profits and hence remaining competitive during economic downturns. For instance, airlines practicing conventional models of business in the US for instance have registered significant operational problems in adjusting to economic shifts when compared to their counterparts in German such as Ryanair and EasyJet that are better known for their relentless commitment in pursuing the virtual airline model (Scott et al 2006). On the other hand, airlines that opt to drop their traditional business models have got a chance to reap multiple benefits. They have an opportunity to penetrate relatively low-cost market segments hence maximizing their revenue base. Again, by moving their aircrafts, capital, employees, as well as other assets from traditional to virtual model of business, the airlines stand a better chance to forgo huge costs that they may have otherwise incurred. This is due to the inherent success and benefits associated with the virtual airline model (Graf, 2005). As a matter of fact, this evidential success has enticed big airlines in the world such as the KLM as well as Southwest (Scott et al 2006).

Lastly Scott et al (2006) discuss “aviation business groups” as their third business model practiced by airlines. In this model they argue that when looked from the customer viewpoint, this business model is more or less similar to the traditional model given that they both employ a collective ticketing. This business model however, indulges agents as well as online services to sell and carry out market promotions targeting mostly travellers on business trips. Practically, and in bid to maximize revenue creation this model also involves other services apart from those targeting business travellers.

For instance, it also provides connection services to other airlines particularly to destination in the interiors of major business hubs. Riding on the wave of outsourcing g in the airlines industry particularly among airlines practicing the virtual airline model, the aviation business group business model seems to offer sound returns to airlines practicing it. For instance, Lufthansa and Singapore airlines provide a good example of airlines that have cut themselves niches by riding on the wave of outsourcing that has hit the contemporary airline industry. By being a potential outsourcing services provider for other airlines practising the virtual airline model aviation business group model airlines can utilize its staff as a source of revenue generators as well as doing their ‘in-house’ maintenance.

2.2.5. Recent Aerospace Industry Models

Yusuf, Gunasekaran, and Abthorpe (2004) argue that contemporary market economies have changed over the years. Such changes has occasioned significant change of marketplace operations to an extent that internationalization is inevitable. They argue that initially companies were only concerned with creating quality products and selling them at reasonable prices. However, this is not the case in the contemporary marketplace. Companies must offer more than quality and affordable goods and services. They must ensure that their services are flexible and realistic to market forces such as diminishing sales, increased competition, high costs of production, etc. while still ensuring quality and value for money.

Using the case of Rolls-Royce the authors demonstrates how Enterprise Resource Planning (ERP) can be applied in the aerospace industry with satisfying results.  Rolls-Royce had struggled for a long time with different operations systems without achieving significant results. The company incurred huge costs, despite the products being practically inefficient and incompatible with modern aerospace industry trends. However since it adopted the ERP model, Rolls-Royce handles all its complex operations in more efficient and predictable ways (Yusuf et al, 2004). The gist of the model is that it links together all processes involved in the critical production processes such as finance, human resource, procurement, manufacturing, inventory, supply, etc. this helps to cut down inventory levels, reduces redundancy, as well as inducing efficiency (p. 264).

According to Almeida (1997­, the US aero engines industry has lost a significant chunk of its past glamour. It used to occupy the global number one position in the manufacture of original aircraft equipments, however du e to he calls “uncertainty” (p.2). However, given that two of the global leading aero engines OEMs, Pratt and Whitney General Electric continue to command significant market presence indicates that they have devised ways of mitigating this uncertainty. It is arguable that mitigating such uncertainty demands sound marketing strategies, risk management strategies, and above all organization integration strategies. Such organizational integration which entails close partnership between aero engines OEMs can go a long way in stabilizing prices as there are no threats of some company pricing its goods at lower prices to woe customers. Again, organizational integration allows for joint financing of key production processes and materials making the companies to reduce their overall cost of production considerably.

It should be noted that the demand for aero engines and aero engines parts is not high given the high prohibitive costs involved in its overall assembling, a thing that makes ownership of aircrafts a preserve of the societies most wealthiest. As a matter of fact, aero engines industries serve only four major categories of customers: aircraft frame builders, airlines, governments, and armed forces. By fair terms this is relatively a small market. Consequently, aero engines companies that do not engage in organizational integration practices may find themselves playing second fiddle to their rivals. Again, basing on the fact that the aero engines market is highly “cyclical” (Almeida, 1997, p.4) it can be very difficult for companies to break such existing cycles particularly if it does not offer competitive services. In competitive services aero engines companies can offer high discounts to their customers on condition that they also include binding after services sales contracts.

This arrangement is advised by the unique nature of the aero engines industry where engine manufacturers’ gain up to three times the value of the engines from the normal sale of spare parts and maintenance services during the lifespan of the aero engines.  As of 1997, Pratt earned from half to two times from the proceeds of the value of engines it sold through after sales services (sale of spare parts and maintenance), GE earned about three quarters of the value of the sold engines, while a P&W earnings from spare parts sales amounted to 40 percent of the total earnings before taxation (Almeida, 1997). Similar sentiments are shared by Ward and Graves (2005) though using a different terminology, “through-life management” (p.4). The through-life management model entails “the life-cycle management of products, services and activities required in [delivering] a fully integrated capability to the customer, while reducing the costs of ownership for the customer” (p. 5). The bottom line of this model is that the customers are accorded more value for their money throughout the product life.

3.0 METHODOLOGY

3.1 Introduction

This methodology chapter describes the processes that were involved in the collection and analysis of data in this dissertation’s comparative study that involved three aero engines companies; Rolls Royce; General Electric, and; Pratt & Whitney for the services after sales that they offer to their aero engines customers. The study will also cover the ISO standards for these services for each of the companies. Finally, a SWOT analysis for each company for the services after sales will be performed.

The main source of data will be structured questionnaires, online and over the phone interviews, and direct collection of information from the companies’ official web sites as well as from a range of other authentic sources which include journal articles and textbooks.

Essentially, this chapter will provide the basis on which discussions, inferences, and findings will be drawn from in support of the study topic. Precisely, the chapter will be aiming at improving the existing knowledge base on the best management practices on critical services after sales involving aero engines companies; aircraft frame builders; airline operators; as well as other air travel stakeholders. The presentation of the chapter content and discussion is made more reflective by my experience in engineering which I have gained from previous degree and most importantly the hands-on-experience in the work field.

Perhaps to present the ideas and discussions presented in this chapter in more operational terms, the study set out to fulfil the following practical objectives: (1) to assist aero-engine companies in improving and expanding services after they have made the actual sales; (2) to help aero engines companies find solutions to the problem of sustaining customers not within the company’s branches, and; (3) to find appropriate ways to satisfy both the customers and employees of the aero engines companies.

In doing this, the chapter will seek to give a detailed account of the value aero engines industry “offer to one or several segments of [their] customer[s] and the architecture of the firm and its network of partners for creating, marketing and delivering this value and relationship capital in order to generate profitable and sustainable revenue streams” (Osterwalder et al 2005, pp.17-18).The services after sales, the ISO certification, as well as the SWOT analysis for the three companies will be addressed using the four-pillar framework of: product, customer interface, infrastructure management, and financial aspects as envisioned by Osterwalder et al  “Nine Business Model Building Blocks” in Table 3 (p.18). Moreover, the discussion will take a deeper scrutiny in each of the pillars in view of eliciting how they add value to each of the aero engines companies tackled and most importantly how they contribute to building sound upward and downward customer relations among the aero engines companies, aircraft frame builders, airlines operators, as well as other industry specific stakeholders.

Perhaps this chapter’s underlying essentiality can be compared to Buckminster Fuller’s bold assertion when he attempted to define design science (Design Science, 2010). He postulated that:

“The function of what I call design science is to solve problems by introducing into the environment new artifacts, the availability of which will induce their spontaneous employment by humans and thus, coincidentally, cause humans to abandon their previous problem-producing behaviors and devices. For example, when humans have a vital need to cross the roaring rapids of a river, as a design scientist I would design them a bridge, causing them, I am sure, to abandon spontaneously and forever the risking of their lives by trying to swim to the other shore”.

In the same note it is expected that the results from this chapter will provide real-time “artifacts” capable of addressing various operational and organizational challenges facing the aero engines industry. 

For purposes of clarity, coherence, and neatness the chapter will be structured into the following seven sections which will be built in a successive manner from each other:

  • Introduction: covers a detailed account of study purpose as well as an outline of the various sections of the chapter.
  •  Research design: gives an account of the modalities of the qualitative research strategy employed in the study such as the sampling method and the target demographic, and most importantly the reasons underlying the choice of the research strategy.
  • Research context: covers the relevant details about the research strategy being used in the study.
  • Participants: gives a detailed account of the three companies being studied, their services after sales and ISO standards.
  •  Data collection: offers a clear procedure on the methods and steps involved in the process of data collection as well as the rationale behind such procedures.
  • Data analysis: covers the modalities involved in organizing, analyzing, and displaying the collected data as well as the rationale for the chosen methods.
  • Limitations and problems: offers a wide range of problems encountered in the overall process of tackling the research topic.

3.1.1. Diagrammatic Presentation of the Chapter

3.2 Research Design

According to Osterwalder (2004) choosing a research methodology for what he terms as a “generic business model framework” research study is not an easy task particularly when the set objectives for the study are not in tandem with the conventional “research directions” (p.3). In support of his postulations he argues that indeed business model research is a unique topic that does not only involve the “understanding of a phenomenon, rather it is a problem-solution finding approach” that seeks to delineate the underlying “concepts and relationships that allow expressing the business logic of a firm in order to be able to formally seize this business logic” (p. 4). Given this research study involves a comparative study of the “services after sales” business model practiced by three aero engines companies the same fate befalls it.

Even so, based on Babbie (2004) postulations, a number of research strategies can be applied in studying the services after sales practiced by the three aero engines companies. In this regard both exploratory and explanatory methodologies can be applied with much ease. Whereas exploratory methodology can only be applied in a qualitative research scenario, explanatory method can be applied with significant success in either qualitative or quantitative scenarios.

Essentially, this study will utilize a qualitative research methodology. The decision to opt for this methodology is based on the fact that it is very easy to identify the inherent features of the services after sales accorded to customers by each of the three sampled aero engines in operational terms when using qualitative research design. As a matter of fact, a qualitative methodology ensures that all key issues that affect a particular phenomenon such as the salient features of each of the three companies’ services after sales are clearly outlined (Babbie, 2004). Moreover, basing on Creswell (2003) postulations on interviews and case studies it is most probable that a qualitative research will offer the best results for the study given that the underlying research problem centers on how each of the three aero engines companies handle after sales services.

Owing to the large number of aero engines companies’ with a global market presence only a small fraction of this number was considered for the study – Rolls Royce, General Electric and Pratt & Whitney. This decision is in harmony with Ader, Mellenbergh, and Hand (2008) perception of a study sample. Precisely, they opine that a study sample should not be too big or too small. In clarification, they argue that a big study sample may pose challenges in data processing and may end up consuming a lot of resources. Moreover, they argue that a small sample may not offer a complete representation of the targeted demographic.

Essentially, the companies were selected on the basis of the size of market share they occupy in the global aero engines industry. In this regard, the study narrowed down on the ten best performing aero engines companies. Most importantly, the companies were sampled by virtue of the services after sales they provide to their aero engines customers – only those companies providing services after sales to their customers were selected.

Owing to the study sample’s small size there was no coercion for participation: companies were formally requested for their voluntary consent to take part in the study. To ensure that the selected participants fulfilled the study sampling criteria, that is: (a) Among top ten global aero engines companies, and (b) Offering services after sales to their aero engines customers:- the study relied on Forbes 2010 survey results as well as on the companies’ websites. Request letters were sent to each of the sampled ten aero engines companies to seek their mutual consent to participate in the study. Out of the ten contacted companies, only seven responded back, with the remaining three conspicuously failing to respond to the request. Out of the seven responses six were positive and one was negative. Consequently, the choice of the three companies (Rolls Royce, General Electric, and Pratt & Whitney) was done in a random manner among the six positive responses.

To enhance participation the companies were assured that only the information they were willing to divulge would be used in the study. After all, the researchers were only interested with information relevant to the research topic. Ideally, this strategy was indeed a necessary one as it helped to eliminate any potential cases of mortality (withdrawal) on the part of the sampled participants during the study.  

3.3 Research Context

This research study took a period of four months to complete, starting from starting April to July 2010. It involved three aero engines companies: Rolls Royce, General Electric, and Pratt & Whitney, which were randomly selected from a ten sampled companies that fulfilled the two major sampling requirements: (a) occupy a relatively large market share in the global aero engines industry- in this case only the top ten global aero engines companies were chosen, and; (b) have services after sales for the aero engines they offer to their customers.

The research involved a case study where information was independently extracted from each company through questionnaires, interviews, and direct extraction of information from the companies’ websites as well as other online sources. Ideally, the process was carried out concurrently for all the three companies. This was necessary given the five-month set timeframe for the study.

3.4 Participants

This study involved employees of the three aero engines companies. At least five representatives from each company were involved in the study, making a total of fifteen participants. The first round of data collection required at least one company representative to fill the questionnaire then the second step involved four more representatives from each company. In this regard restrictions were not imposed on participants who took part in the filling of the questionnaire from taking part in the interviews. However, the interviews were conducted on four different participants, meaning that some companies produced four participants particularly those who had one of their representatives taking both the questionnaire and interview, while others had five, those who had different.

So as to enhance flexibility, the probability of the companies to agree to take part in the study, and most importantly to reduce the potentialities of withdrawal from the study, it was reasoned that the companies should be given an opportunity to make a choice on whom to represent them in filling and answering the study questionnaires and interview questions. The wisdom behind this decision was advised by the researchers’ efforts not to be perceived as interfering with the companies normal work schedules.

In this regard it was the companies that chose whom to represent them as opposed to the tradition where the researcher makes the decision. Even so, it was mutually agreed that the participants be persons with a fair knowledge of their respective companies operations and history. Ideally, as it turned out all the fifteen participants were persons holding senior management positions in their respective companies.

3.5 Data Collection

The process of gathering data for this study involved three levels as advanced by Babbie (2004). Data was acquired through structured questionnaires and interviews as well as from the company websites and other online sources. The interviews and questionnaires were structured according to the guidelines offered by Creswell (2003) and Kvale and Britmann (2008).

The first level involved dispatching the structured questionnaires to the companies. Each company was expected to fill one such questionnaire. There was no discrimination as to which personalities were supposed to fill the questionnaire in each company – any designated person with a fair knowledge of the company operations was considered fit to fill the questionnaires. However, for purposes of accuracy and validity the companies were given a period of two weeks to study the questionnaires and fill them accordingly. Then the returned questionnaires were studied, transcribed, coded and analyzed as per the selected data analysis methodology.

The second procedure involved highly structured interviews which were conducted through the phone and/or the internet depending on the ease of access to either of the two on the part of the participants. The interviews were conducted on four representatives from each of the three companies. Again, as was the case with the questionnaires there were no discriminations as to which cadre of employees was eligible to take part in the interview. To allow for flexibility the companies’ were free to designate whoever they felt was better positioned in answering the interview questions. Due to the involving nature of the structured interviews as well as the unpredictable work schedules on the part of the participants interviews took significantly a long period of time to complete. Precisely, it took two full months to interview all the twelve participants from the three companies.

The third level of the data collection process and perhaps the most impartial involved the gathering of information from both primary and secondary sources regarding the salient features of the services after sales offered by the three companies. This was done from the companies’ official websites as well as from a host of PDF files available online. It was reasoned that employees of the three companies might be tempted to make some untrue claims in the questionnaires and during the interviews hence leading to biased findings. To this end, the use of primary information from the company websites as well as secondary information from unbiased online sources served to mitigate such eventualities.

3.5.1 Questionnaire Items

[See (p.91) in the Appendices for Questionnaire Items]

3.6 Rationale for Questionnaire Items

The preparation of the questionnaire item was advised by the nature of services after sales offered by aero engines companies: Costly and rigorous production and maintenance processes make it very difficult for companies to venture on their own. The numerous mergers and alliances among large airlines as well as joint ventures among top aero engines companies justify this generalization.

 In this regard questions were framed to capture all the services after sales that are extended to aero engines customers after they have made the actual purchases. These services include; MROs, engine swaps, spare parts distribution, life time engines, on wing services, technical publications, and engine upgrade services as well as the ISO standards used by the companies. 

Question 1 and its proxies was the most important in the questionnaire as it aimed at eliciting the range of services after sales each of the companies’ offers to their engines customers.

Question 2 and its proxies acted as an extension to question 1 given it sought further elaboration for each of the answers given in the preceding question.

Question 3 was meant to provide information that would be used to make a conclusion as to the economic benefits of each service after sales.

Question 4 sought to extract the companies view on the strengths and weaknesses of each service after sales as well as the measures in improving on such.

Question 5 and its proxies touched on the ISO standards that each of the companies subscribes to in the delivery of its services. Again, it played a similar role played by question 1.

Question 6 aimed at providing clear delineations as what each of the answers given in question 5 entails in terms of its benefits to the companies’ quest for success.

Question 7 was general in nature and it sought to provide an industry-wide overview, particularly on what needs to be done to streamline customer services.

Question 8 was targeted to the research methodology, particularly on the nature of the data collection tool (questionnaire), that is, whether it covered all the necessary study topic areas as well as whether it overstepped its mandate.

3.7 Data Analysis

Due to the intensive nature of the proposed research problem, empirical information collected through the structured questionnaires and interviews as well as the information extracted directly from the three companies’ websites and other online sources was analyzed using a qualitative continuous data analysis method of coding and writing short memos (Kvale, 1996; Trochim, 2006).

The first step in this process involved a purposeful scrutiny of the empirical information with a view of evaluating its accuracy and succinctness. The data then was closely studied and all important information (main points) pertaining to the research topic was indentified and jotted down in a memo in form of short notes. These short notes were then transcribed using Microsoft word processing program with view of making them simpler and hence easy for further analysis.

The transcribed data was then subjected to further scrutiny, with the results codified into more meaningful units easy for further analysis and interpretation. Next, the coded information was subjected to an ad hoc approach that involved the use of comparative tables where coded data was entered into labeled columns and rows and graphs. From there the data was used to construct graphs (Maxfield & Babbie, 2008; Kvale, 1996).

3.8 Limitations and Potential Problems

Some of the problems encountered during this study included selection-mortality threat during the study demographic sampling process. Not all the companies that were earmarked for selection were willing to commit themselves to the entire process or even to avail critical information about their services after sales as well as allowing their employees to participate in answering the questionnaire and interview questions. For instance, out of the ten narrowed down companies, only six were subjected to sampling. Altogether, three companies never bothered to reply to the participation requests while one company sent regrets for its unavailability for the study citing reasons of too much work commitments on the part of its employees.

Again this trend was visible during the actual process of data collection where some participants (who were designated by their respective companies to represent them) delayed with returning the distributed questionnaires and /or agreeing to avail themselves during interview-appointment dates without giving good reasons for such failures. Such delays occasioned significant disruptions to other study activities. On a positive note, the whole process was accomplished within the set timeframe despite these time management snags.

There were also problems with the communication channels during the interview process where sometimes participants’ responses were not clearly communicated and hence not correctly recorded. For instance, some of the online interviews were to some extent not successfully conducted due poor network connections either on the interviewee or interviewers end. This occasioned a repeat of such interviews using the same communication channel or a different one in a bid to capture as much information as expected. 

Being a qualitative research, this study was also prone to a barrage of social interaction threats such as compensatory rivalry, resentful demoralization, compensation equalization threat, and imitation (Trochim, 2006). For instance, some of the answers given during the interviews and questionnaires may have been artificial, in that, participants may have been tempted to give answers that would give the impression that their companies had the most competitive services after sales. Again, basing on the natural desire to withhold key secrets, participants may have tempted to avoid giving correct information regarding their companies’ services after sales strategies for fear that their rivals would act on such information to initiate undue competition in future.

 Nevertheless, to mitigate the effects of this validity snags it was reasoned that the participants or their companies should not be informed about the other companies taking part in the study. Specifically, this measure lessened the probability of the participants/companies having prior awareness about each other’s participation in the study.

4.0. CHAPTER 4: RESULTS

4.1. Introduction

This chapter coherently presents the data that was collected using the three levels of data collection, that is, questionnaires, interviews, and study of the companies’ websites and other materials. The results covers the study’s three core areas of focus, that is, (a) The services after sales offered by the three aero engines companies to their aero engines customers; (b) The ISO standards for these services, and; (c) The SWOT analysis for each company for the services after sales they provide. For purposes of clarity and coherence the chapter is divided into a number of sections whose organization and purpose was determined by a number of factors. Essentially, the results were arranged in a comparative manner so as to enhance easy interpretation and objectiveness during the discussion stage of the dissertation (Glatthorn & Joyner, 2005).

In this regard it was advised by the study objectives that were meant to: (1) Assist aero engines companies in improving and expanding services after sales they offer to their customers after they have made the actual sales; (2) Help aero engines companies find solutions to the problem of sustaining customers not within the company’s branches, and; (3) Find the most appropriate ways to satisfy both the customers and employees of the aero engines companies.

In a nutshell, the chapter provides a set of carefully analyzed data presented in a clear and precise manner to accord the audience an opportunity to judicially make inferences regarding the services after sales that each of the three aero engines provides to its customers. For example, the SWOT analysis results creates a clear impression on which among the three companies offers quality and most effective services after sales to its customers.

4.2.0. Companies Profiles

4.2.1. Rolls-Royce

Coming out of financial and administrative woes experienced between 1970s and 1980s, the UK-based aero engines manufacturer grew in leaps and bounds to regain its war-time success record when it supplied almost all the Allies military aircrafts involved in both World War I and II.  Perhaps this rapid expansion trend has been as a result of its range of services that spans the military, civil, marine, as well as industrial energy sector. Rolls-Royce has also made very significant acquisitions and alliances which have resulted into consolidation of a huge chunk of military and civil aerospace industry (Rolls-Royce, 2010).

Head quartered in Derby, England in the UK, Rolls-Royce enjoys a strong market command given that it has also strong links in the American market through a number of its subsidiaries in the US and Canada. This strategic positioning has enabled it to compete effectively with its two major rivals, namely GE and Pratt & Whitney. As a matter of fact, the company serves the greatest number of large airlines and their subsidiaries when compared to GE or Pratt & Whitney (Rolls-Royce, 2010).

Some of the most promising company developments are the partnering with GE in the Engine Alliance to supply the newly refurbished Airbus A350, a venture that culminated into the launching of its Trent 900 model. Its wide range of engines which includes gas turbines for both military and civil airliners whose number exceeds 50,000 as well as industrial power generation systems, nuclear reactors, and marine turbines (Rolls-Royce, 2010).

It was found out that the three companies have entered into alliances with other aero engines manufactures in developing engines for modern jumbo aircrafts. One such alliance is the Engine Alliance between GE, Rolls-Royce, and Pratt $ Whitney to develop the Trent 900 model of engine for the newly refurbished Airbus A350. Pratt & Whitney also has another alliance, the International Aero Engines Corporation with Rolls-Royce and two other leading global aero engines companies. The aerospace industry is also awash with other alliances between the three main levels of companies, – aero engines manufacturers; aircrafts frame builders, as well as airlines. As a matter of fact, alliances between aero engines and companies representing the other two levels, that is aircraft frame builders and airlines play a huge role in enhancing the overall competitive edge enjoyed by the top aero engine manufacturers as airlines and aircraft frame builders alike prefer doing business with companies that can provide lonh term MROs as well as other types of services after sales. This is no doubt an indicator that, indeed all the industry players are beginning to acknowledge the benefits of extending services after sales to their customers.

As it has been highlighted in the study, these services after sales have resulted into complete takeovers (mergers and acquisitions) where big companies end up gaining the full rights over other smaller companies. As a matter of fact, this is a trend that GE has greatly relied on in consolidating its position as a global leader in the aero engines industry. The company has managed to acquire numerous small aero engines companies on its way up the global aero engines marketplace. In fact, its strong corporate culture is partly responsible to the conglomerate of units that specializes in different services that contribute to the strengthening of its brand to stand tall in the market. On the other hand,

Another phenomenal trend that can also be attributed to services after sales is the wide range of products manufactured by the aero engines companies. As companies put mechanisms to facilitate the traditional RMO particularly services such as spare parts distribution or even computer based training they recognize the cost-benefit of them manufacturing the support equipments on their own instead of buying them from other sources. In the case of computer-based training for example, it is more economical for aero engines companies to manufacture the hardware and software equipments used in the actual training of its customers on how to use and carryout maintenance of their engines when compared to buying them from other manufacturers. This observation is responsible to the trend of manufacturing of multiple products among the aero engines. For example, GE operates several other support businesses which include power generation, computing, industrial automation, locomotives, and medical imaging equipments among other activities. On its part, Pratt & Whitney also produces gas turbines for marine, rockets, power generation, as well as for other conventional industrial use, while Rolls-Royce produces a range of services that spans the military, civil, marine, as well as industrial energy sector.

Moreover, it can also be concluded that the three companies

4.2.2. General Electric

GE occupies a pivotal position in the aero engines industry. The company’s overall sales volume, profitability, as well as market share is among the industry high courtesy of its long history that dates back to late 1800s. Over the years it has not relented on its quest for success and it has registered numerous acquisitions to consolidate the position it occupy today. Apart from its aero engines division, the company also operates several businesses which include power generation, computing, industrial automation, locomotives, and medical imaging equipments among other activities.  Perhaps this has been realized thanks to the numerous acquisitions and alliances that the company has managed to make over the years, the most notable alliance being the General Engine alliance with Pratt & Whitney back in 1996 to manufacture high technology engines for modern aircrafts’ needs (GE, 2010).

With its head offices at Fairfield, Connecticut GE continues to rule in the aero engines industry thanks to its powerful brand that leverages not only within the bulging US industry but also the world over. Its aero engines range of products is among the most reliable in terms of efficiency, fuel consumption, and overall emissions.  As a measure to consolidate its market share the company enjoys a strong corporate culture that is made up of a conglomerate of units each specializing in different services that makes its brand to stand tall in the market (GE, 2010). 

4.2.3. Pratt & Whitney

            Pratt & Whitney prides to be among the top three aero engines companies globally. This is a position that is earns by pursuing strong market positioning strategies that involves spread of its key operations in a number of fields. Currently, the company produces gas turbines for marine, rockets, power generation, as well as for other conventional industrial use. It can also be argued that the company’s recent success has been occasioned by its ability to hold off competition from its two main rivals, GE and Rolls-Royce by forming joint ventures in critical engines manufacturing areas. Again, its global presence adds more strength to its overall market leverage given that it has direct service outlets equipped with its modern engine parts and employees in more than 180 countries (Pratt & Whitney, 2010).

            With its head offices at East Hartford, Connecticut the company  enjoys a good corporate rapport with its customers, a thing that it fulfils through two main alliances, notably the Engine Alliance with GE and the International Aero Engines Corporation with Rolls-Royce and two other leading global aero engines companies.  Overall, Pratt & Whitney faces a bright future given its wide range of engines including the new GP7200 meant for the new Airbus A380 as well as clients which includes leading global airlines such as Southwest, Northwest, United Airlines, Virgin Airlines, JetBlue, and Air India among others (Pratt & Whitney, 2010).

4.2. 0. Services after Sales and ISO Standards

4.2.3.0. Services after Sales

ServiceRolls-RoyceGeneral ElectricPratt &WhitneyComments
MRO: *Entails the regular maintenance services to aircrafts engines either by designated engineering companies or by the company-specific engineers.    *The company has got a well organized MRO system that is structured into networks. Each network is responsible for a particular type of engine category. *Such networks are distributed throughout the company’s facilities spread across the globe (Rolls-Royce, 2010).Same*Has the Global Service partners that offer services to a wide range of engines from other companies including those of GE and Rolls-Royce. *Pressure washing services that cleans engines of any foreign bodies and hence improves their overall efficiency (Pratt & Whitney, 2010).*This service is very crucial for aero engines companies given that it encourages specialization and innovation particularly, when it is collaboratively shared. *As such, aero engines OEMs, their customers as well as other industry players need to pool together their different specialities by forming open and interactive networks of peers
Spare Parts Distribution *This service entails the sale of spare parts to its engines customers. *It can be done by the company distribution divisions or even designated entities spread across the globe.*This service entails the traditional sale of spare parts as well as leasing of engines. *The company also offers real-time engine checkups to mitigate potential engine failures (Rolls-Royce, 2010). Same*General Material Solutions that grants its CFM56 engine customers the opportunity to access modern engines repair services for the same. *This service also grant customers fleet management benefits (Pratt & Whitney, 2010)This service accords customers an opportunity to actively take part in the overall maintenance of the engine life cycles. *Most importantly, it accords customers a value for their money and efforts though at the long run.
On Wing Service: *It entails the repair of engines while the aircrafts still at the airports runways.Same*A certified wing service that facilitates any form of support to complex engine snags.  *The on wing support service is given by OEM trained and equipped personnel. * The service reduces the cancellation of flights due to mechanical problems (GE, 2010). *Fast, reliable, and environmentally friendly on wing services to all its engine customers (Pratt & Whitney, 2010).*This service entails urgent repair and engine check-ups while the aircrafts ere still stationed in runways awaiting departure. *Support teams traverse territorial borders into airports stationed in foreign lands. *It is a very crucial service as aero engines companies get to work directly with their customers.
Engine Swaps: It entails quick and stress-free exchange of faulty engine with new ones. *Does not practice this service though it offers complete MRO packages.*It has innovative services after sales that accord its customers an opportunity to swap engines during normal overhaul servicing. The swapped engines are easy to acquire and have a guaranteed performance making customers to cut down on maintenance costs. *Sometimes such engine swaps takes place on runways carried out by the GE on wing team of engineers or by the contracted maintenance groups (GE, 2010).*Offers custom engines services, leased engines, as well as the sale of new engine parts. *This service is crucial to the stabilization of the airspace industry as it cushions small airlines from service disruptions in the events they surfer from major engine. * Even so, this service may proof costly as the aero engines companies incur the costs of the engines value particularly if such engines have very short span of their lifecycle remaining. *Companies that have not started practicing this service should not feel obliged to do so as it is very expensive and it can be substituted with less cheaper MRO services.
*Lifetime Engine This service entails a closely monitored services to engine starting from the time a customer makes contact with the manufacturer to the time the engines lifespan lapses.*A service that seeks to alleviate maintenance hassles on the part of the clients’ right from the time they buy the engines until they retire. *It eliminates doubts on the part of airlines by according them financial predictability (Rolls-Royce, 2010).SameSame*This service is not necessary especially for GE that practices quick engine swap. * Even so, it helps to cut down the costs involved in owning such engines for both aero engines and their customers.
 
Technical Publications: Entails the publication and distribution of maintenance manual to operators  *The company develops engine maintenance manuals which it distributes to its customers. *Such manuals contain all technical information that operators may require to improve their engines lifespan. *Again, the manuals inform the customers of the latest engines innovations and how they can incorporate such in their engines (Rolls-Royce, 2010).SameSame      *This is a general practice among aero engines companies although the variety of other services provided by the companies waters down its impact. *It is very crucial particularly when launching new engines parts.
Engine Upgrades Services: It entails the regular innovations made on existing engines to reduce costs involved in owning such engines.*Employs modern technologies as well as cost-benefit concepts to upgrade its engines. *This greatly cuts down the overall costs involved in maintaining engines as the whole process is shared between the operators and the company. *It also offers its customers upgrade kits to enable them to upgrade engines on their own (Rolls-Royce, 2010).SameSame*Aero engines have a relatively long lifespan although this can be greatly reduced if new innovations are not utilized to make up for worn- out engine parts. *This service is very crucial for aero engines company as it ensures engines do not retire at the same time.
Computer based Training:    *Training is carried out from various stations distributed across the globe, in the US, UK, Canada, as well as in Asia. *The actual training takes place at designated fields, classroom s, as well as at customers’ premises.*The company employs visual, audio, as well as 3-D innovations to conduct online training hence reaching a large number of itsSame*At this age of information technology, aero engines customers need not travel to overseas training centers to learn important engine maintenance skills. *All major aero engines companies are subscribing to this service. *This service helps to save costs as customers can download training manuals and learn the procedures on their own.
ISO:AS9100:2009: It covers the entire supply chain in the aviation industries.      Same Same*Member of the International Aerospace Quality Group (IAQG) made AS9100:2009 standard measure. Services covered in A S9100:2009: *Quality and data control measures; shelf life; calibration of measuring and test equipment; operations and storage facilities; shipping facilities that allows for proper labeling of equipments before transit and after transit, and; recording and disposal services for written-off parts among other services (Pratt &Whitney, 2009).This standard helps in the general delivery of services.    

4.4.0. SWOT Analysis

4.4.1. Rolls-Royce

Rolls-Royce
Strengths *World class company whose range of services covers marine, nuclear, electrical generation, and aero engines. *Has state-of-the-art outlets spread across fourteen different countries that offer services after sales such as MROs and sale of spare parts. *Has a well structured and efficient business model that ensures a constant generation of new orders for aero engines,  servicing of such orders, identifies and solves customer problems, build strong customer relationships, and most importantly fulfill the shareholders expectations. *Has a wide network of MRO partners that are globally recognized making the delivery of services after sales more economically manageable (Rolls-Royce, 2010).Weaknesses  *The company faces a huge task in maintaining its market position in the light of competition from its key rivals, Pratt & Whitney and GE. *Long time taken to test engines before approving them to start flying. This costs a lot of time and money. *Small size of the global aviation industry- aircrafts are only owned by a few individuals making the précising of engines largely controlled by the few customers (Hoffman, 2009).  
Opportunities * The company boasts for having one of the most powerful engines, the Rolls-Royce industrial Trent is the industry leader in terms of its efficiency. *As a matter of fact, this engine type has revitalized the aero engine industry and set new standards particularly in the areas of power output. *A derivative of the gas turbine, the Trent system is multipurpose, in that it can be used in both simple power as well as heat recovery modes making it more efficient, versatile, and powerful (Rolls-Royce, 2010). Threats *Due to its large capital outlay the company is greatly affected by economic crunches. *unpredictable political crises which has engulfed various countries in the recent years. *Changing customer preferences in the wake of rapid developments in information technology. *Emerging technologies that enables video conferencing making travelling to attend key meetings a thing of the past. *Data breaches – this is a common problem across the industry where hackers’ illegally access private data (Hoffman, 2010).

4.4.2. General Electric

General Electric
Strengths * A well structured and focused support system that encompasses the realms of logistics, project management, tooling, as well as other conventional support programs. * The company history is painted with significant industry achievements beginning from the slogan, “We Bring Things to Life”, to “Progress Is Our Most Important Product”, and “Live Better Electrically.” * Enjoys certification for its services after sale from a wide range of regulatory bodies globally: such as; FAA,EASA, CAAC, (Cincinnati), FAA, EASA (Dallas), FAA, KCASA, CAAC (Soul), FAA, EASA, CAA (London), FAA, EASA, PAA (German), and FAA, CAAC (Xiamen) (GE, 2010).Weaknesses
*
The company also suffers from the stiff competition in the air travel industry where part of airlines competition involves choosing the most reliable and reputable. *oligopolistic competition from the top aero engines companies. *This competition comes in the wake of the race to increase overall market volume (Hoffman, 2009).

Opportunities * It boasts as America’s first turbojet manufacturer, the first in the category of turbojet engines: the GE90 and GE Next-generation (GEnx) models. *In fact, GEnx model is arguably the most prolific jet engine in terms of its quietness, less emission, and fuel efficient. *On the other hand, GE90-115B is by far the most powerful civil aircraft engine running on less fuel and emitting less toxic. * The company endeavors to harmonize its products and services in a bid to achieve optimum after sales services it offers to its customers. * GE has a far reaching history that spans over fifty years. Precisely, it is the world leading aero engines company that provides products and quality services that enable them to fly to far destinations * Member of Engine Alliance with Pratt & Whitney that reduces unnecessary competition as well as cutting down operation costs (GE, 2010). Threats * The company faces a number of industry specific threats such as huge budgets demands which makes the planning and implementation processes a real nightmare. *Technology hitches – due to its increased technological involvement, minor hitches disrupt the smooth running of its programs. *Data breaches – this is a common problem across the industry where hackers’ illegally access private data. *Functionality threats – the many processes, departments, procedures, etc makes running and coordination a real nightmare (Hoffman, 2009).

4.4.3. Pratt & Whitney

Pratt & Whitney
Strengths: *Has adequate tools and equipments that allows for regular tests on the worthiness of its engines. *Well coordinated work scheduling and execution procedures that ensure corrective measures are carried out immediately and problems are identified. *Has a rich history that stretches over 80 years as a pivotal industry player. *Partners well with its customers and the society in general through a barrage of corporate social projects. This earns the company significant reputation as not only a profit conscious entity but also a mindful one. For instance, it hosts “Matching Gift Programs” that encourage sits employees to contribute to charity organizations (Pratt & Whitney, 2010). Weaknesses  *High costs of operation occasioned by complex production and customer care services. *Rigid operation procedures that poses challenges in aligning them with costs mechanisms. *Excess and tedious production procedures that poses management challenges.   * Labor management challenges (Pratt & Whitney, 2010; Hoffman, 2009).  
Opportunities *It has a large supplier base, made up of more than 1, 500 suppliers spread through Canada alone, with others spread across the globe. This helps to open up new market segments for the company. *Has well funded and coordinated R&D team that is responsible for initiation of new innovative designs of aero engines. *The company expects to develop more than 20 new engine types in the coming years that it will add to its more than 65 engines types it has already developed in the last 12 years of services. *Banking on its more than 80 year-long history the company can expand its overall market tentacles * Engine Alliance with GE that reduces unnecessary competition as well as cutting down operation costs (Pratt &Whitney, 2010).Threats *Competition from rival aero engines companies *Lawsuits filed by environmentalists following alleged environmental degradation. *Declining employment levels occasioned by economic recessions and mass employee exodus to rival companies such as Rolls-Royce and GE.  *Data breaches – this is a common problem across the industry where hackers’ illegally access private data  (Hoffman, 2009; Pratt & Whitney, 2010).  

4.5.0. Compiled Results          

Services after Sales Comparative Results 1

Explanations of the Graph: The graph shows a visual breakdown of the findings from the three companies’ services after sales, ISO standards, as well as the SWOT analysis results. The maximum rating for each service was fixed at ten (10), with the lowest rating being one (1), and zero (0) denoting no service. The scale was divided into six rating grades: 0 = none, 0 – 1 = Poor, 2 – 3 = Low, 4 – 5 = Moderate, 6 – 7 = Good, 8 – 10 = Excellent. 

All the companies offer almost all the services studied save for one service, engine swaps which is not offered by both Rolls-Royce and Pratt & Whitney. Again, from the rating, it is clear that there is no huge difference in the services after sales offered by the three companies – the curves shows very slight deviations save for the engine swap service which is offered by GE alone.

4. 6.0. Conclusion

A balanced account on this chapter is that it has substantially addressed its core objectives of analytically presenting the dissertation’s findings from the three levels of data collection involved. These results clearly delineates how each of the three companies fares in so far as the delivery of services after sales to their respective aero engines customers and the ISO certification they utilize in the delivery of such services. Most importantly, the results show how the future of three companies’, in terms of their ability to address the weaknesses and threats they face by utilizing their strengths and opportunities. The results were analyzed according to the four pillars of; product, customer interface, infrastructure management, and financial aspects as outlined in Osterwalder et al (2005) “Nine Business Model Building Blocks” framework (p.18). Briefly told, the presentation of the results for each of the three core areas of focus (services after sales, ISO standards, and the SWOT analysis) was based on their propensity to add value to each of the three companies and most importantly how they contribute to building sound upward and downward customer relations among the aero engines companies, aircraft frame builders, airlines operators, as well as other industry specific stakeholders.

5.0. CHAPTER 5: DISCUSSIONS

5.1. Introduction

This chapter seeks to present a detailed interpretation of the study findings. In doing this it will juxtapose the results with the findings and theoretical frameworks advanced in other literary works. Basically, the results will be interpreted within the context of the four pillars of; product, customer interface, infrastructure management, and financial aspects as outlined in Osterwalder et al (2005) “Nine Business Model Building Blocks” framework (p.18). In this regard, there is no doubt that the dissertation has succeeded in achieving what Buckminster Fuller postulated as “new artifacts” that aero engines companies can utilize to come up with new business models capable of mitigating industry-specific as well as market challenges such as stiff competition, declining revenues, and increase in the overall costs of operation (Doing Science, 2010).

A quick overview of some of the most outstanding findings from the study shows that, overall, aero engines market is unequally “shared.” As a matter of fact, it has been demonstrated that, though the industry is awash with many players the struggle for market dominance is actually between the three companies studied. Going back to the study participants’ selection criteria, the three companies were selected by virtue of their large market share as well as the services after sales that they offer to their customers. Again, it has also been demonstrated that due to the unique nature of the aero engines industry (capital intensive), customers tend to look for engine manufacturers who will offer them the most competitive services after sales as a measure to cutting costs and inducing efficiency. Moreover, it has been demonstrated that due to high competition as well as diminishing customer numbers, aero engines manufacturers are forced to sell their engines at huge discounts hence reducing the profit margins. Even so, due to the long lifespan of aero engines as well as regular maintenance and supply of spare parts, engine manufacturers tend to amass revenue from the services after sales they offer to their engine customers. As such, it is clear that these companies have managed to maintain their pivotal positions in the industry courtesy of the well established services after sales engagements. 

5.2. Detailed Explanations of the Study Results

Though the “traditional” services after sales are not new in the aerospace industry, their utilization as a form of business model is relatively new in the industry (). Even so, due to its evidential benefits the practise is gaining significant support from many aerospace industries, particularly the OEMs (Farris et al, 2005). Perhaps as it has been demonstrated in this study this is due to the fact that the aerospace industry is unique – it involves high amounts of capital, high technological know-how, and relatively long “manufacturer-customer” engagements (Almeida, 1997). This postulation is true at least going by Kerr and Ivey (2001) opinion that the high investments costs involved in the aero engines industry as well as long periods of time it takes for such investments to break even forces companies to look for alternative methods of generating revenue and expanding their existing customer base. As such, it has been a tradition among engines manufacturers to make follow-ups on engine sales to ensure that they are properly utilized and serviced so as to run their full length of time. Even so, such follow-ups have been limited to mere spare parts delivery and warranty obligations (Almeida, 1997).

 This dissertation, has adequately demonstrated that the kind of services after sales offered by the three companies to their customers goes beyond these traditional follow-ups – they are services that are collaboratively shared and geared towards establishing lasting relations and not just to service engines for the sake of fulfilling contract agreements (Johansson, 2004). For instance, the range of new services after sales offered by the three companies such as on-wing service, engine swap, life engines, electronic publications, as well as computer based training seek to ensure that engines are kept at serviceable conditions all the time. As Saccani et al (2006) postulates, this enhances the engines lifespan, cuts down maintenance and operations costs, and in turn solidifies the manufacturer-customer relations. Moreover, basing on Mabert et al (2006) postulations, aero engines manufacturers that practice this wide range of services after sales ceases to be “spare parts” entities – they take on the new role of “service” industries.  As offered by Almeida (1997), services after sales are now part and parcel of many aero engines manufacturers overall business strategies. Convincingly, as observed from the three companies’ services after sales are pursued with much zeal and zest with the main intention of creating value “to one or several segments of [their] customer[s] and the architecture of the firm and its network of partners for creating, marketing and delivering this value and relationship capital in order to generate profitable and sustainable revenue streams” (Olsterwalder et al, 2005, pp. 17-18).

In regard to the study aims and objectives it is clear that each of the three companies studied in the dissertation provides services after sales for their aero engines. Even so, the extent which each of the companies offers such services differs greatly. Perhaps this is in mitigation of the unique industry challenges that faces the aerospace industry as highlighted by (Almeida, 1997). This is in concurrence with what was highlighted in the literature review regarding the unique nature of the aero-engines industry – it entails large sums of capital to manufacture aero-engines, to build aircraft frames, to carter for fuels and labor expenses, as well as taxes paid to domestic and foreign governments for using their airspaces (Almeida, 1997).

One trend emerged very strongly pertaining to the aero engines industry, particularly on the mode of “sharing” the available customers at global the marketplace. No doubt this trend deserves to be described as oligopolistic given that the three companies occupy the lion share of the market share (Scott et al, 2006).The aero engines industry is controlled by the three companies, with other smaller companies taking negligible portions of the market share. In fact, due to the stiff completion as well as diminishing customers some of the smaller companies are forced to seek support from these three large companies. As discussed in the literature review chapter, Almeida (1997) attests that the three companies liaise with smaller engine companies who produce engine parts then they sell to them for complete assembling and selling. The case of GE attests to this postulation – the company has managed to consolidate its position as a global leader in the industry through a series of mergers and acquisition (GE, 2010). Such acquisitions help to strengthen the overall market presence of the companies as they enhance specialization and efficiency – each of the acquired companies specializes in a given set of engine parts. Again, such acquisitions makes services after sales cheaper and more efficient to facilitate as each unit may specialize in a different type of service, for instance, those designated to handle on-wing maintenance, others to cater for computer based training, while others can specialize in offering general MROs.

Another form of oligopolistic market arrangement that can be drawn from the study findings is the formulation of alliances between the top three aero engines companies. For example the Engine Alliance between GE and Pratt & Whitney as well as the International Aero Engines Corporation between Pratt & Whitney, Rolls-Royce and two other large global aero engines companies. That these alliances were purposely created to manufacture high technology modern engines points to the generalization that the three top aero engines companies are destined to hold on firmly to their oligopoly.

Another observation that comes out clearly is that though the study did not carryout a cost-benefit analysis to determine which among the nine studied services after sales is more beneficial, it can as well be boldly asserted that a combination of all the types of services after sales a company accords to its customers leads to a collective competitive advantage. To quote Almeida (1997) in his work that drums support for services after sales he opines that, though GE had far more sales than Pratt & Whitney the total revenue registered by Pratt & Whitney in 1995 surpassed that of GE simply because Pratt & Whitney still received revenue from its follow-up services such as spare parts distribution to its existing customers. This is because Pratt &Whitney had commanding market leverage in the 1970s with GE overtaking it in the 1990s, meaning that although it was experiencing a weak market leverage, the services after sales were doing a great job in balancing its book of accounts. This means that the sum total of the services after sales that a company accords to its customers are more lucrative in terms of revenue gathering than the amounts of sales that a company makes at any given time. Perhaps, this is a trend that is made possible by the long lifespan of the aero engines, where a good serviced engine should last for as long as 25 years. This means that a company that is experiencing reducing sale volumes may still amass huge revenue form its existing client, but only if such company pursues services after sales.

As part of its unique findings, this study clearly shows that GE leads the pack among the top three aero engines firms in terms of services after sales it offers to its customers. Perhaps this is as a result of the many businesses that the company run as well as the many acquisitions it has made so far. GE scores high marks particularly on its computer-based training services, engine swaps, as well as on-wing services. Basing on the above explained postulation that, the level of the services after sales an engine manufacturer accords to its customers make the greatest impact in terms of revenue collection when compared to the revenue collected through the normal sales of engines, (Almeida, 1997) it can be deduced that GE stands the best chance to not only serve its existing customers but also new ones as it can utilize the high revenues it is amassing to build high technology engines on its own. Moreover, the results of the SWOT analysis presented thereof also serve to solidify this postulation given that the three companies face almost similar challenges, and that the company that has got the highest amount of revenue stands the better chances in mitigating such challenges either through R&D or even through mergers and alliances an area that GE scores relatively well compared to the other two companies. Even so, in regards to ISO certification, Pratt & Whitney score relatively higher points when compared to the other two companies, an indicator that both its engines as well as the Again, the study remains non-committal in  

This study was not committal in determining the ultimate impacts of each of the independent services after sales on the aero engines firms, at least on cost-benefit analysis point of view. As it is boldly stated in the aims and objectives section, it was only concerned in investigating the extent which each of the three study companies fair in terms of offering services after sales to their aero engines customers. In this regard, the dissertation has provided sufficient evidence showing that each of the companies pursues at least nine different services after sales types. In essence, this seems to concur with what Yusuf et al (2004) opined. No doubt it is an acknowledgement of the impacts of the contemporary changes that have engulfed the aero engines industry, where firms go out of their traditional operation policies to reach out for other like minded firms in bid to form cartels that help to mitigate escalating operational costs, stabilize prices, and most importantly reduce unnecessary completion. As a matter of fact, Yusuf et al (2004) opine that gone is the time when firms used to dedicate huge chunks of their time working the improvement of the quality of their products and selling them at the most competitive prices. They argue that contemporary aero engines firms are concerned with providing other services that enhance long-term relationships with their customers – services that are not only geared toward creating new customers but also geared towards cutting unnecessary costs incurred as a result of lack of proper follow-up services on the part of the manufacturer particularly on highly technical products such as aircrafts engines. In this regard, companies must strive to facilitate more than just quality and affordable goods and services – they must ensure that their services are flexible and realistic to market forces such as diminishing sales, increased competition, high costs of production, etc. while still ensuring quality and value for money.

5.4. A Comparative Analysis from the Automobile Industry Standpoint

In reinforcement to the interpretations made in this chapter, it is wise to borrow ideas from the automobile industry where customer satisfaction is one of the most important factors that differentiate been industry leaders and followers. Part of this satisfaction is delivered through regular servicing at the dealers yard or even by designated entities. As a matter of fact, most automobile companies are investing heavily in building up big waiting lounges where customers can park their cars awaiting to be serviced by the dealers. A study carried out by JD Power in Thailand in 2009 confirmed that the trend of customers opting to source for their car servicing at the dealers outlet is on the increase. As a matter of fact, customers are shifting their allegiance to dealers who can accord them maximum levels of after sales services. These after sales services include normal car servicing to provision of amenities such as watching TV, reading magazines, talking to the technicians while servicing the car, accessing internet, and food and drinks among other services. The study also indicated that dealers who carried out post-contact to the customers after the actual servicing greatly increased the overall customer satisfaction. This is because such post-contact enabled the customer to report any problem that they may have experienced after their cars were serviced (Toyota Thailand, 2009).

In a nutshell, increasing the overall customer satisfaction not only ensures that the customers are delighted but most importantly leads to reduced costs of owning cars as well as costs of after sale services such as warranties as it is less unlikely that well serviced cars will get damaged quickly. Customer satisfaction also leads to increased sales as new customers are brought in by their friends who were satisfied with dealers’ services. The study’s main findings were that, Toyota provides the most competitive after sales services, with 825 points followed closely by Mazda with 824 (Toyota Thailand, 2009). Moreover, a recent study carried out by Accenture, a global management consulting, technology services and outsourcing firm, indicates that overall, services after sales among the automobile industries is responsible for between 10 to 15 percent of the total sales and it is responsible for between 25 and 50 percent of the overall profits, besides its positive leverage on customer loyalty. In fair terms, these are huge returns on a service that until recently was snubbed by many automobiles as a costly endeavor (Refocusing on the Aftersales Market, 2010).

Together, these studies suggest that, high customer satisfaction levels greatly influences buying patterns as potential buyers will definitely engage dealers who provide them with the most competitive after sale services (Toyota Thailand, 2009; Refocusing on the Aftersales Market, 2010). These findings galvanize this study’s main postulation that indeed services after sales provides the most practical opportunity for growth and consolidation of market position among companies in the technology and capital intensive industries.

Though fundamentally different, there are a number of lessons which aero engines manufacturers can draw from the automobile industry. For instance, the notion of customer satisfaction as espoused in the automobile industry can be borrowed by aero engines manufacturers so as to offer services after sales that not only enhance engines efficiency but also address all the aspects of the whole “manufacturer-customer” engagement right from the time news engines innovations are conceptualized, through the actual engines purchase up to the time they retire. To this end, aero engines manufacturers can involve their customers in the overall development of engines right from the R&D stages, through the actual assembling of the engines, the actual use, maintenance, right up to the time they go into retirement. This will definitely save a lot of costs which sometimes are incurred as a result of duplication of services due to lack of mutual communication between the engines manufacturers and their customers. Again, such a move will mitigate the high risks that are normally incurred in the development of new engine models. Customers (airlines, aircraft frame builders, as well as military entities) can jointly with the engine manufacturers invest in the development of new engines model as a way of ensuring certainty within the industry. Engine manufacturers may nurture worthwhile dreams of revitalizing the industry with modern models of engines capable of addressing the critical areas of pollution, longevity, and fuel consumption but still may feel restricted in pursuing such ends due to the inherent high risks and uncertainties. As such, to mitigate these risks and uncertainties, engine manufacturers and their customers alike should jointly work together.

            Again, aero engines manufacturers can borrow from the Accenture “end-to-end after sales” practical approach that aims to position OEMs at pivotal industry positions through optimization of the overall after sales chain, where core organizational processes such as customer care management, warranty management, dealer network management, parts logistic, service support, and revenue management are the hallmarks. As a matter of fact, this approach to services after sales is a holistic one as it covers even the dealers, suppliers and customers alike. This is made possible through the application of modern technological advancements. In a nutshell, this approach aims at optimizing performance, generating huge profits, cutting down the total operation costs, as well as streamlining the spare parts inventory books.

As OEMs, aero engines manufacturers can improve their services after sales by embracing a number of changes as outlined in the Accenture research. To ensure that the intended benefits of services after sales are not watered down by long logistics networks, they should overhaul their logistics systems with view of making them leaner and more efficient. Again, they should involve their dealers, customers, and suppliers so as ensure any new changes are mutually compatible with the roles and expectations of all the stakeholders. Aero engines companies should also centralize their inventory management systems to ensure easy discrimination between entries – this can be achieved by integrating key operational tasks. To ensure optimum customer loyalty companies should seek to widen up their range of services so as to enrich their customers and dealer satisfaction. Aero engines manufacturers should also consider increasing their overall dealership networks particularly on those dealers who offer critical services such as on-wing maintenance which is carried out in far away airports all over the world. As such, they should initiate close relations between dealers’ stationed foreign countries so as to ensure that quality services are accorded to the customers. Again, dense dealership network can go a long way in promoting the outsourcing as a sure way for reducing wastage while encouraging specialization. Lastly, aero engines manufacturers can benefit from this end-to-end after sales approach by increasing the channels of passing out information among its dealers, suppliers, and customers. Most importantly, aero engines manufacturers should create “oversight” bodies charged with the responsibilities of monitoring the entire process and instituting reinforcements where necessary.

5.5. Implications of the Study Findings

The findings presented in this study have got huge importance to the aero engines manufacturers and other sectors of the aerospace industry. Perhaps this is because of its opportunistic timing – coming at a time when the industry is facing a lot of operational as well as competition challenges (Buxton et al, 2007). As briefly hinted in the introduction section the findings of the dissertation comes at a time when most aerospace companies are beginning to look for fresh business ideas to mitigate the market shocks such as the unpredictable economic crunches that has over the last few years dealt a huge blow to many companies in the industry. In essence, the industry is facing challenges occasioned by the recent financial crises that caused many companies to file for bankruptcy while others were bought by bigger industry players who also suffered massive losses in the form of diminishing customers, cancellation of engine orders, as well as high rates of payment defaulters’. Moreover, this is a time when also the prices of fuel are at a record high and unpredictable occasioning the increment of the operation costs among aircraft frame builders and commercial airlines who make the lion share of aero engines manufacturers customers. Again, the September 11th terrorists’ attacks played a huge role in dampening the industry prospects as airlines faced declining customer numbers, flights were cancelled, aircrafts were grounded, and even some small airlines went into spontaneous slump (Thompson et al, 2008). Needless to say, the aero engines industry was greatly affected as demand for engines went down drastically and services after sales also went down given many aircrafts were grounded or flew for fewer hours.

Most tellingly, as Scott et al (2006) opine, these challenges are taking place at the backdrop of a shift of administrative policy among many jurisdictions. This is a time when the industry is getting “weaned” from the financial support it initially enjoyed from the domestic governments particularly during financial crises. As a matter of fact, major airlines which were initially considered as national flag carriers and therefore privileged to enjoy financial immunity even at the middle of financial crises have today been stripped those privileged leaving them to look for alternative means to cushion their operations. This is as a result of the changing economic ideologies, where it has been reasoned that supporting some industry players while leaving others unsupported is tantamount to market chaos where some companies may deliberately pursue lax policies in full realization that the public coffers will come to their rescue in times of trouble (Buxton et al, 2006). Ideally, though all sectors of the economy are also nursing the severe impacts of the recent economic recession, the aero engines industry will take a long time to fully regain its pre-recession strength. This is because of the unique nature of the industry given the high specialization, high costs incurred in the numerous developmental stages of engines, as well as the relatively long engine life cycles that makes getting of new customers a real challenge (Kerr & Ivey, 2001; Buxton et al, 2007). This observation validates the findings of this study, particularly on the notion that services after sales that goes beyond the conventional repair and maintenance of engines is capable of not only increasing a company’s revenue base but also doubling its total profit, as well as bringing in new customers.

In this regard, the dissertation has presented sufficient evidence that supports the notion that services after sales is today a rewarding business model among the high technology and capital intensive industries. In light of the above challenges, these findings will play a pivotal role among the aero engines companies worldwide, such as the Rolls Royce Company, GE, Pratt & Whitney, and the MTU Aero Engines among others. The findings also present a rich reference source to managers in the realms of marketing and operations as well as any other individuals interested in improving the overall sustainability of their companies. As a matter of fact, the findings also moves beyond the aero engines industry – the intensive discussions provided in the literature review as well as in the discussions chapters provides clear linkages to other industries such as automobiles, telecommunication, information technology, as well as other technology and capital intensive industries. No doubt, these are real-time findings whose applicability spans the entire aerospace industry – all other OEMs, aircraft frame builders, airlines, as well as military departments can utilize these findings to cushion the dwindling profits brought about by high inflation rates as well as unpredictable market economy.

6.0. CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS

6.1. Introduction

The findings presented in this dissertation were drawn from the responses given during the structured interviews carried out on the 15 study participants, the structured questionnaires responses from the 15 participants involved in the study as well as the direct scrutiny of the study company official websites and other authentic sources. In extension, the data collected thereof was transcribed and subjected to a qualitative continuous analysis design that involves the drawing of short memos and coding of information retrieved from such short memos. This made the processes of interpreting and presenting the results easy. As part of its ethical obligations, the study also honored all the necessary participants’ rights such as the right to privacy, confidentiality, refusal to take part in the study, as well as the right to fair treatment during the study. In this regard, it is strongly believed that the study met the minimum validity and reliability measures for conventional academic research of this nature.

This dissertation set out to establish a number of aims and objectives. Precisely, the main aims were to: (a) Make a comparison between three aviation industry companies: Rolls Royce, General Electric and Pratt & Whitney in terms of services after sales for aero-engines that they offer to their customers. (b) Compare the ISO standards that each of the company use in the overall delivery of their services after sales. On the other hand, the main objectives were: (1) To assist aero-engine companies in improving and expanding services after they have made the sales; (2) To help aero-engine companies find solutions to the problem of sustaining customers not within the company’s branches; and (3) To find appropriate ways to satisfy both the customers and employees of aero-engine companies. On the other hand, to compare the ISO standards utilized by each of the three companies, a SWOT analysis was carried out for each of the three companies. These rigorous processes were necessary as they helped to facilitate a sound “industry and company-specific” comparative study.

In light of the above listed study aims and objectives, this chapter aims to carry out a recap of what was addressed in the dissertation in regard to the set objectives. Such recap will serve the purpose of providing a succinct conclusion about the extent which these aims and objectives were met as per the study findings. The conclusions will be based on the findings of the study and will act as the platform on which the study recommendations will be based on. Most importantly, the conclusions will discuss the overall contribution of this study on the roles of IT in HRM processes, while the recommendations will be advanced in terms of how this study’s findings can be made more valuable by future studies.

6.2. Conclusions

From the intensive industry and company-specific study that this dissertation undertook, a number of conclusive inferences can be drawn. The general inference is that, the dissertation succeeded in meeting the set aims and objectives. In regard to the first aim it was found out that all the three companies have almost equal mechanisms that help to accord their customers the most competitive services after sales. Out of the nine services used in the comparative study all the companies were found to be providing them except for few cases. This shows how each of the top aero engines companies is committed to providing products and services that bring together all the industry players and above all meet the contemporary industry-specific challenges. For instance, only Rolls-Royce that does not practice the engine swaps services. Even so, there are significant differences in the way each of the company structures each of the nine services studied. Though the study found it very hard to discriminate which between the three companies offers the best services after sales, a balanced account from the study results shows that GE fairs relatively well particularly on its on wing, engine swaps, and computerized training services.

On the other hand, in regard to the second aim it was found that all the three companies are members to the International Aerospace Quality Group (IAQG) that awards the ISO AS9100:2009 standard measure which covers services such as, quality and data control measures; shelf life; calibration of measuring and test equipment; operations and storage facilities; shipping facilities that allows for proper labeling of equipments before transit and after transit, and; recording and disposal services for written-off parts among others.

Again, in regards to the first objective, it is hoped that the intensive literature review as well as the study findings presented in this study will go about inducing confidence on the part of aerospace industry players who have been until now shy in investing heavily in services after sales. The industry-wide and comparative discussion regarding the applicability of the services after sales as a form of a modern business model among the technology and capital intensive companies can be utilized by companies in all levels of the aerospace industry with convincing results. Moreover, in regard to the second objective, aero engines companies can utilize the wide range of services after sales approaches described in the comparative discussions section in the discussion chapter. For instance, end-to-end after sales practical approach advanced in the study carried out by Accenture may be applied with a commanding effect given it espouses a holistic industry approach where OEMs can successfully engage their dealers, suppliers, and customers for easy and cheaper equipment servicing.

It was found out that the three companies have entered into alliances with other aero engines manufactures in developing engines for modern jumbo aircrafts. One such alliance is the Engine Alliance between GE, Rolls-Royce, and Pratt & Whitney to develop the Trent 900 model of engine for the newly refurbished Airbus A350. Pratt & Whitney also has another alliance, the International Aero Engines Corporation with Rolls-Royce and two other leading global aero engines companies. The aerospace industry is also awash with other alliances between the three main levels of companies, – aero engines manufacturers; aircrafts frame builders, as well as airlines. As a matter of fact, alliances between aero engines manufacturers and companies representing the other two levels of the aerospace industry, that is, aircraft frame builders and airlines operators play a huge role in enhancing the overall competitive edge enjoyed by the top aero engines manufacturers, as airlines and aircraft frame builders prefer doing business with companies that can provide long term MROs as well as other types of services after sales. This is no doubt an indicator that, indeed all the industry players are beginning to acknowledge the benefits of extending services after sales to their customers.

As it has been highlighted in the study, these services after sales have resulted into complete takeovers (mergers and acquisitions) where big companies end up gaining the full rights over other smaller companies. As a matter of fact, this is a trend that GE has greatly relied on in consolidating its position as a global leader in the aero engines industry. The company has managed to acquire numerous small aero engines companies on its way up the global aero engines marketplace. In fact, its strong corporate culture is partly responsible to the conglomerate of units that specializes in different services that contribute to the strengthening of its brand to stand tall in the market. On the other hand,

Another phenomenal trend that can also be attributed to services after sales is the wide range of products manufactured by the aero engines companies. As companies put mechanisms to facilitate the traditional MROs particularly services such as spare parts distribution or even computer based training they recognize how much they save extra costs if  they manufacture the support equipments on their own instead of buying them from other sources. In the case of computer-based training for example, it is more economical for aero engines companies to manufacture the hardware and software equipments used in the actual training of its customers on how to use and carryout maintenance of their engines when compared to buying them from other manufacturers. This observation is responsible to the trend of manufacturing of multiple products among the aero engines. For example, GE operates several other support businesses which include power generation, computing, industrial automation, locomotives, and medical imaging equipments among other activities. On its part, Pratt & Whitney also produces gas turbines for marine, rockets, power generation, as well as for other conventional industrial use, while Rolls-Royce produces a range of services that spans the military, civil, marine, as well as industrial energy sector.

In light of these revelations it can be boldly concluded that services after sales is now a fully fledged business model that draws the most attention among the high technology manufacturers of engines and engine parts. In fact, as demonstrated in the preceding chapters the increasing costs of operation due to unstable fuel prices, economic crunches, political instability, natural calamities, as well as undue competition from rival companies any business model that promises to mitigate on such costs is worthy being tested (Buxton et al, 2007). Moreover, as demonstrated by Scott et al (2005) modern aero engines manufacturers have shifted from the traditional roles of engine manufacturers, spare parts distributors, or even repair and maintenance entities to fully fledged service industries that offer a gamut of services to their customers.

No doubt, if relentlessly pursued as in the case of Rolls-Royce, GE, and Pratt & Whitney services after sales that incorporate all the nine areas highlighted in the results chapter are capable of making loss-making companies into profit making entities. Apparently, the trend is clearly set among the aerospace companies – collaborative engagements are the only way to effectively deal with the industry shocks. After all, so as to remain competitive, companies are always guided by the need to align their services with the prevailing industry and marketplace trends. This dissertation has convincingly established that Roll Royce, General Electric, Pratt & Whitney as well as other major aero engines manufacturers continue to ride on the fruits of the well established services after sales partnerships with their customers which include major aircraft frame builders, government agencies, military forces, and commercial airlines.

Perhaps these conclusions are given shape by Buxton et al (2006) concept that aero engines manufacturers are the aerospace industry drivers, as they directly leverage the revenue creation practices for all the industry stakeholders either through the normal EFHs or the EFCs or even through the conventional maintenance and consumables. In this regard, shared industry engagements guided by the need to mitigate the inherent risks and uncertainties that characterize the industry should be the “in-thing” in this modern global era. No doubt, the message here is aero engines manufacturers should collaborate with aircraft frame builders, airline operators as well as other ancillary services providers in the industry.

6.3. Recommendations

This dissertation has provided a rich knowledge bank in regard to the study topic. Even so, as highlighted in the limitation section of the methodology chapter there is still some areas of the study topic that still require more research work. For instance, in regard to the worry that some participants may have been tempted to give misleading answers for fear of letting out important secrets the study’s three levels of data collection may still be subjected to validity questions given that a second round of questionnaires and interviews was not carried out. In this regard, a study that will involve two rounds of data collection on each level with completely different participants is mostly likely to mitigate these validity doubts.

On the other hand, the study only involved the top three aero engines manufacturers who already have cutout a significant market niche for themselves. The study findings would have been more telling if the lower-end companies were involved. For instance, it may be obvious that because of the large customer base that these companies command makes their services after sales more lucrative. It may also be obvious that due to the small customer numbers, lower-end companies may derive very little profits from this new business model. In this regard, it is hereby recommended that a study that will involve at least four companies representing both upper-end and lower-end companies in the aerospace industry will address these validity doubts.

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 Buxton, D, Farr, R, & McCarthy, B 2006, ‘The Aero-Engine Value Chain under Future Business Environments: Using Agent-Based Simulation to Understand Dynamic Behavior,’ MITIP, 11-12, Budapest.

Buxton, D, McCarthy, B, & Wang, K 2007, ‘Simulation for Operation Strategy   decision in the “new” service based aero engine industry,’ PCMS College of Service  Operation, Third Annual Conference, July 2–3, 007, London Business School.

Doganis, R 2001, The Airline Business in the 21st Century, Routledge, London, UK.

Drouchi, Tarik, Penessi, Paris, Kepledici, Dharm, & Cthbert, R 2008, Performance Based Service Contracts: Real Options Scenario from Defence.”

Farr, R 2006, ‘Business model review’, VIVACE 2.1/UNOTT/T/06002-1.

Farris, MT, Wittmann, MC, & Hasty, R 2005, ‘Aftermarket support and the supply chain: Exemplars and implications from the aerospace industry’, International Journal of Physical Distribution & Logistics Management, Vol. 35, No. 1, pp. 6-19.

Graf, L 2005, ‘Incompatibilities of the low-cost and network carrier business models with in the same airline grouping’, Journal of Air Transport Management, No 11, pp 313 – 327

Hill, C W L 1994, International Business: Competing in the Global Workplace, International Edition. Illinois: Irwin, pp.466-467.

Johansson, F 2004, ‘The Medici Effect: Breakthrough Insights at the Intersection of Ideas, Concepts and Cultures’ Harvard Business School Press, Boston.

Knotts, RMH 1999, ‘Civil aircraft maintenance and support fault diagnosis from a business perspective’, Journal of Quality in Maintenance Engineering 5(4), pp. 335-348.

Larsson, A, Ericson, A, Larsson, T, Isakson, O, & Bertoni, M 2010, ‘Engineering 2.0: Exploring Lightweight Technologies for the Virtual Enterprise’, in, From CSCW to Web 2.0: European Developments in Collaborative Design, eds. D. Randall & P. Salembier, (eds.), Springer: London.

Marbert, Vincent A., Soni, Ashok, & Campbell, Gerard, 2006, ‘A Case Study of Pratt and Whitney Aircraft’s Commercial Spares Planning’, Communications of the IIMA 2006, Vol. 6, Issue 3.

Monroy, C R & Arto, JR V 2008, ‘Structure and Relationship Within Global Manufacturing Networks,’ Latin American and Caribbean Conference for Engineering and Technology, WEI-1 Honduras, June 4-6, 2008.

Osterwalder, A., Pigneur, Y. & Tucci, CL 2005, ‘Clarifying Business Models: Origins, Present, and Future of the Concept,’ Communications of the AIS, Vol. 15.

Porter, M 1985, Competitive Advantage: Creating and Sustaining Superior Performance, New York, The Free Press.

Scott, D, Hedenryd, E, & Buxton, B 2005, ‘Current aero-industry business models,’ Vivace 2.1/RRplc/T/06001-1.0.

Seccani, N, Songini, L, & Gaiardelli, P, 2006, ‘The role and performance measurement of after-sales in the durable consumer goods industries,’ International Journal of Productivity and Performance Measurement: an empirical study,” Vol. 55, No. 3/4.

Steffen, K, & Hollmeir, S 2009, The Engine Industry: New Avenues to a New Century, MTU Aero Engine, Munich, Germany.

Stranjak, A, Dutta, P S, Ebden, M, Vytelingum, P, & Rogers, A 2008, ‘A Multi-Agent Simulation System for Prediction and Scheduling of Aero Engine Overhaul,’ In: Seventh International Conference on Autonomous Agents and Multi-Agent Systems (AAMAS-08), 12-16 May 2008, Estoril, Portugal. pp. 81-88.

Thompson, A, Gamble, JE 2003, ‘Southwest Airlines: Culture, Values, and Operating Practices’, C-644.

Viardot, E 2010, ‘Exploiting the Full Potential of After-Sales Market’, Pragmatic Marketing, Vol. 3, No. 3. Retrieved on July 14, 2010, from: http://www.pragmaticmarketing.com/publications/magazine/3/3/

Ward, Y & Graves, A 2005, ‘through-life management: The provision of integrated customer solutions by aerospace manufacturers’, University of Bath, School of Management, Working Paper Series 2005.14.

Yusuf, Y, Gunasekaran, A & Abthorpe, MS 2004, ‘Enterprise information systems project implementation: A case study of ERP in Rolls-Royce’, Int. J. Production Economics, Vol. 87, pp. 251–266.

General Electric, 2010, retrieved August 6, 2010, from: http://www.geae.com/

Glatthorn, A & Joyner, R 2005, Writing the winning thesis or dissertation: A step-by-step Guide, 2nd Ed., Corwin Press.

Osterwalder, A, Pigneur, Y & Tucci, CL 2005, ‘Clarifying Business Models: Origins, Present, and Future of the Concept,’ Communications of the AIS, Vol. 15.

Pratt & Whitney, 2010, retrieved August 6, 2010, from: http://www.pwc.ca/en/home

Pratt and Whitney (United Technologies): Fostering Workplace Innovation and Labor-Management Partnership: The Challenge of Strategic Shifts in Business Operations, April, 1999, retrieved August 14, 2010, from: http://dspace.mit.edu/bitstream/handle/1721.1/1593/prattandwhitneycasestudy.pdf.txt;jsessionid=1D338ED580BDC78EB86DAD8DFD0F28A1?sequence=/

Rolls-Royce, 2000, ‘Competing within a changing world’, The Times Newspaper 100 6th Ed.

Rolls-Royce, 2010, retrieved August 6, 2010, from: http://www.rolls-royce.com/

Buxton, D, Farr, R, & McCarthy, B 2006, ‘The Aero-Engine Value Chain under Future Business Environments: Using Agent-Based Simulation to Understand Dynamic Behavior,’ MITIP, 11-12, Budapest.

Buxton, D, McCarthy, B, & Wang, K 2007, ‘Simulation for Operation Strategy   decision in the “new” service based aero engine industry,’ PCMS College of Service  Operation, Third Annual Conference, July 2–3, 007, London Business School.

Doganis, R 2001, The Airline Business in the 21st Century, Routledge, London, UK.

Farris, MT, Wittmann, MC, & Hasty, R 2005, ‘Aftermarket support and the supply chain: Exemplars and implications from the aerospace industry’, International Journal of Physical Distribution & Logistics Management, Vol. 35, No. 1, pp. 6-19.

Kerr, C & Ivey, P 2001, ‘A strategic review of the large civil aero-engine market and the paradigm shift to a service oriented environment’, The Aeronautical Journal, pp.287-293.

Knotts, RMH 1999, ‘Civil aircraft maintenance and support fault diagnosis from a business perspective’, Journal of Quality in Maintenance Engineering 5(4), pp. 335-348.

Marbert, Vincent A., Soni, Ashok, & Campbell, Gerard, 2006, “A Case Study of Pratt and Whitney Aircraft’s Commercial Spares Planning,” Communications of the IIMA 2006, Vol. 6, Issue 3.

Osterwalder, A., Pigneur, Y. & Tucci, CL 2005, ‘Clarifying Business Models: Origins, Present, and Future of the Concept,’ Communications of the AIS, Vol. 15.

Scott, D, Hedenryd, E, & Buxton, B 2005, “Current aero-industry business models,” Vivace 2.1/RRplc/T/06001-1.0.

Seccani, N., Songini, L, & Gaiardelli, P, 2006, “The role and performance measurement of after-sales in the durable consumer goods industries,” International Journal of Productivity and Performance Measurement: an empirical study,” Vol. 55, No. 3/4, 2006.

Stranjak, A, Dutta, P S, Ebden, M, Vytelingum, P, & Rogers, A 2008, ‘A Multi-Agent Simulation System for Prediction and Scheduling of Aero Engine Overhaul,’ In: Seventh International Conference on Autonomous Agents and Multi-Agent Systems (AAMAS-08), 12-16 May 2008, Estoril, Portugal. pp. 81-88.

Steffen, K, & Hollmeir, S 2009, “The Engine Industry: New Avenues to a New Century:” MTU Aero Engine, Munich, Germany.

1.7. Appendices

(a) The Envisaged Business Model Structure

Source: (Osterwalder, A., Pigneur, Y. & Tucci, CL 2005, p. 18).

1.7. Appendices

(a) The Envisaged Business Model Structure

Source: (Osterwalder, A., Pigneur, Y. & Tucci, CL 2005, p. 18).

NB: The nine business model building blocks are grouped into four main pillars of product, customer interface, infrastructure management, and financial aspects. They describes what and a company create its products, how it moves the products to the customer base, how it manages the distribution and production channels, and how it handle sits financial issues.  

(b) Airlines Financial Performance vis-à-vis Business Model Employed

Sources: (Scott et al, 2006, p. 12).

NB: the curve shows that the best performance is realized at either end of the scale. This is an indicator that companies that embrace ‘virtual airline’ and the ‘aviation business group’ models are bound to enjoy buoyed financial performance. Interestingly, airlines practicing the ‘traditional model’ struggle to secure a market grip.

3. Aerospace Industry Costs

Source: (Almeida 1997, p. 3)

NB: Notice the high labor costs which stands tall above all other costs for all levels of aerospace industries.

4. Aerospace Industry Partnerships

Source: (Almeida, 1997, p. 8)

NB: To mitigate uncertainty the major aero engines companies have formed close partnerships where each company specializes in manufacturing models of engines it can produce cheaply and efficiently. Notice each engine model is used in a particular aircraft model.

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Strategic Management: Retail And Civil Aviation Industry

Strategic Management: Retail And Civil Aviation Industry.

Question:

Descibe about strategic sanagement on retail and civil aviation industry?

 

Answer:

Executive summary

Internationalization is rapidly increasing in various parts of the world, and this has given wide range of benefits to many industries. It is helpful in expanding their business in other country. There are many countries that have flexible international trade policies, which have helped in free trade practices in many countries. This report has discussed the retail and civil aviation industry, which are the major industries of New Zealand, and has create wide opportunities for various companies to expand their business in global market.

Introduction

In this portfolio, the globalization extent in the area of global retailing and the manufacturing of civil aero engine is the main statement of discussion (Chomsky 2001). The CAGE distance, PESTEL, as well as Yip’s driver theory will be applied in order to support the discussion (Chomsky 2001). Moreover, there are various firms working in the two industries that will be illustrated in the discussion. CEAM will be sued for demonstrating the international retailing. In the other industry of civil aero manufacturing, GE Aviation will be applied for exemplifying (Chomsky 2001).

When the firms try to keep their development in the economic competitive environment, they should try to plan. This plan is actually not integrated with the conditions, which implies the company’s competence in the lying outside opportunities (Grossman and Helpman 2005). These factors also try to guide the internal resources management in order to operate in cooperation with various actions of management (Grossman and Helpman 2005).

The main purpose is to seek the values of the customers, select the correct strategy for business for improving the company’s competitive advantage and to make the benefits sustainable (Grossman and Helpman 2005). It’s the corporate strategy, which relates to the perception for long term for the managers in order to formulate the strategic decisions in order to take actions for changing the position of the company. Moreover, strategic management is considered as the way to catch the opportunities lying in the complicated environment, avoiding the risk in order to face the threats occurring in external environment for raising the strength and hiding the weakness (Grossman and Helpman 2005). Beside these, implementing the strategies and reviewing the performance will be undertaken. Finally, it will help the companies to make the profits and to hold the sustainable competitive benefits, expansion of market share (Grossman and Helpman 2005).

Strategic groups competing with each other

The industry of aerospace cover up the companies and authorities, which are involved in the manufacturing, operations, as well as maintenance of the aircraft, aircraft equipments and engines (Halliday 2000). There are various civil aviation stakeholders like governments, which includes federal aviation administration, New Zealand Civil aviation authority and administration (Halliday 2000). Other stakeholder is airlines, maintenance repairing organizations such as New Zealand Aircraft engineering company; manufacturers such as Airbus, Boeing, and Rolls Royce, and the last one is owners of private aircraft (Halliday 2000).

The industry of aviation could be divided in various strategic groups that include the huge scope for the business. There are various other strategic groups like, CFM International, Pratt & Whitney, Rolls Royce, as well as General Electric; these are the international top civil aero engine manufacturers, which has same business models as well as similar strategic combination (Halliday 2000).

PESTLE

Trends for GR & CAEM

In the year 2009, the total sales in New Zealand top supermarkets were around 575.6 billion, along with the CAGR that was 15.6% between the years 2006-2009. It’s noted that total outlets of supermarkets was 23814 (Hawken, Lovins and Lovins 1999). The supermarkets that are foreign funded entered in New Zealand in the year 2004, when the government tried to lift the restrictions from the overseas market entry in the retail industry (Hawken, Lovins and Lovins 1999). In the year 2009, the total overseas funded supermarkets cover up RT-Mart, Carrefour, and Wal-Mart that recorded the sales of 175.71 billion that has around 785 stores.

It’s noted that around 31 local supermarkets had the sales of 391.3 billion from around 23004 stores (Hawken, Lovins and Lovins 1999). In the sector of civil aviation, as per the forecast done by the New Zealand Aviation industry corporation, it was noted that there will an increase of 4583 aero planes for civilian in the coming 20 years. It’s evident that New Zealand commercial aero plane market is also expanding (Hawken, Lovins and Lovins 1999). By the coming 2030, the share of the country in the international aircraft fleet will get increase from 9% to around 15%.

Along with this, the jet market business holds the wide increased capacity in the international industry (Amore 1998). In the coming period, the New Zealand is still not able to produce the commercial aero engine for their jet business. It’s noted that every civil aero engines are actually imported from the overseas market. The main players in this market are: Rolls Royce, Pratt & Whitney, GE, as well as CFM International (Amore 1998).

Impact on internationalization on retail and civil aviation industries

In the civil aviation industry, the first globalization sign has emerged as the new availability of the market, which faces the limited possibilities of expanding at their home, and it’s noted that firms that were involved in the management of airport will try to seek the expansion of business (Amore 1998). They even appeared with many companies that lie outside the business of airport, and are interested in make use of opportunities in order to become the international player in the airport industry (Amore 1998). They even achieved the success, as they hold the ability to become global players.

The New Zealand retail industry is actually not considered as the most prestigious industry and therefore, it is not sanctioned similar to the state owned infrastructure along with the sector of heavy industry (Ashford and Moore 1999). It’s evident that local government of the country will try to upgrade the image of the city through closing down the wet street markets. As New Zealand economy is growing, they are exploring quality goods, services, as well as good brand names (Ashford and Moore 1999). The retailers that are funded from foreign market could easily fulfill the expectations of younger generations.

Ghemawat’s Cage framework

In order to support the client for understanding the variation in the market of China and New Zealand for the purpose of formulating the strategies, Ghemawat’s CAGE Distance Framework could be applied that identifies the Administrative, Cultural, Economic, as well as Geographic differences as well as distance among the two countries (Bauman 2002). The differences in society and culture like values and religions are significant factors, which impact the firms while entering in global markets (Bauman 2002). The traditional religion of China is the Buddhism, where else, New Zealand follows the Catholicism and Christianity.

Companies from both the countries conduct their business in different ways. In the traditional Chinese societies, relationships or contacts are based on the kinship as well as local networks, mainly within the retail industry (Bauman 2002). English is considered as the national language in New Zealand, where else in China, Mandarin is the popular language; these variations impacts on high end industry of civil aviation in comparison to retail industry (Bauman 2002).

Ghemawat has mentioned that political barriers will remain under the pictures for internationalization of their operations. New Zealand has adopted the close door policies, and the liberalization in the country has lead towards the political climate, which is less restrictive. Accession in New Zealand by the World Trade Organization is considered as the significant milestone for economy of the country (Button and Taylor 2000).

After becoming part of World Trade organization, New Zealand has started reforming the trading liberalize rights through reducing the tariff barriers, enhancing the goods and service access in the market, minimization of traffic rates and protecting the intellectual rights of property (Button and Taylor 2000). Although the government of the country has put its best efforts in order to promote the rules of laws, lack of transparency, systemic as well as endemic corruption, inconsistent regulations and laws, weak intellectual property, unreliable legal system are still the barriers for the business profitability in New Zealand (Button and Taylor 2000).

The state level involvement within the economy by the huge state owned enterprises remain as the high distortions within the market along with protectionist measures for the domestic as well as state enterprises for impeding the fair competition and trade (Button and Taylor 2000). After the financial crisis, it’s noted that there is a phenomenon that various private owned business are acquired through the state owned firms due to the reduction in liquidity (Button and Taylor 2000).

The time zone of China is right hours, which is ahead of London and the flying time of the country is between the two capitals, which is around ten hours. In China, the ongoing structural reforms such as export and investment growth have resulted in the yearly GDP growth rate, which is around 10% from the last 4 years (Doganis 2001). Sustainable growth has minimize the poverty and supported in creating the high demand for the consumer goods as well as air travel that supports in generating the opportunity for business in the retail and the aviation industry (Doganis 2001).

George Yips drivers of internationalization

Compare drivers of internationalization in both industries

The retail industry is not actually referred as the prestigious industry by the government of New Zealand, and therefore it’s not sanctioned  through the heavy industry sector as well as state owned infrastructure (Hanlon 2007). Local government of the country will try to upgrade the image of the city through closing the street wet markets. As the New Zealand economy is growing rapidly, they are looking for the better quality products, services, along with better brand name (Hanlon 2007). Retailers that are funded from overseas market try to fulfill the expectations of the young generation (Friedman 2005). After understanding the New Zealand macro environment, CR and CEAM will try to formulate the market strategy of the country (Hanlon 2007).

It’s evident that the industry of civil aviation has the highest rank in the market internationalization, due to its end users in various countries, which have the similar requirements for their products and the customers and try to search for the complete suppliers in global market (Button and McDougal 2006). The key players within the civil aero engine are the General Electric, CFM International, Pratt & Whitney, as well as Rolls Royce. It’s evident that competitive internationalization drivers are at high (Button and McDougal 2006). It’s also evident that cost globalization drivers in the industry of aero engines rank high, due to the high cost development as well as having the single national market, which is enough for paying back the investment (Button and McDougal 2006).

Driving internationalization in GR & CAEM

The entry of the big global players in the New Zealand in the present years has depicted that New Zealand is the current gold rush for the international companies, which try to expand their market share (Button and McDougal 2006). The international grocery retailing industry is noted to be one of the various business sectors, which has tried to come in China in order to make most out of the many consumers who avail products and services. CAEM continues to carry with the strategy of expansion through relying over the local distributors, who has tried to supervise the product delivery to the stores from the regional stores (Button and McDougal 2006). The company thinks that the flexibility is considered as the major priority mainly while operating in the new market (Hart 1975). The development cost is lesser, as the company is not able to build their network through the stores by considering the issues related to the service uniformity and the check quality controls (Button and Taylor 2000).

Why these industries internationalize / nature and extent of internationalization 

George Yip has proposed the drivers model for the growth of global strategy between the corporate companies. They have introduced the four key category drivers, which are referred as the key for determining the globalization extent in the specific industry (Button and Taylor 2000). These are: drivers of cost globalization, market globalization, competitive globalization, along with the government globalization drivers (Levine 2002). A company that tries to exhibit these above mentioned drivers as being part of the local in terms of nature, or conversely the firm having the high number of drivers that become global in terms of operations and outlook (Button and Taylor 2000).

These drivers are not considered as stand-alone, however, due to the fact it tries to create influence on the cycle, which ultimately determines the corporate readiness of the organization to join in the rank of international companies (Button and Vega 2007). Otherwise, it’s stated that these globalization drivers are actually governed through four various factors like economic and political considerations, technology, politics and legislation, and the social and demographic considerations (Button and Vega 2007). Countries that have beneficial combination of various drivers as possible are preferred in international industry. Due to the high globalization tendency, various retail companies are starting with the possibility to expand their business in having the bigger customer base (Button and Vega 2007).

Conclusion 

It’s noted from the research that through globalization, economic interdependence in the countries has increased with the enhancement in volume as well as cross border transaction in goods and services. Internationalization has powerful political, economic, social, as well as cultural dimensions. The research has discussed about GE and CAEM companies that are working in area of retail and civil aviation.

References

Amore, M. 1998. New airport, new opportunities, Marketing and Commercial Strategy Handbook. ACI-Europe.

Ashford, N. and Moore, C. 1999. Airport Finance. Loughborough Airport Consultancy.

Bauman, Y. 2002. Globalizarea ÅŸi efectele ei sociale. Editura Antet. London: British Airways, Global Scenarios. London:  British Airways.

Button, K. and Taylor, S. 2000. International air transportation and economic development. Journal on Air Transport management, 6, pp. 1-12.

Button, K.J. and McDougal, G. 2006. Institutional and structural changes in air navigation service providing organizations. Journal of Air Traffic Management, 12(5), pp. 236-252.

Button, K.J. and Taylor, S.Y. 2000. “International air transport and economic development”. Journal of Air Transport Management, 6(4), pp. 209–222.

Button, K.J. and Vega, H. 2007. The uses of the “temporal-fares-offered curve” in air transportation‟. Journal of the Transportation Research Forum, 46(2), pp. 83-100.

Chomsky, N. 2001. Chomsky and Globalisation. Cambridge: Icon Books Ltd. Chomsky, N., 2002. Understanding Power: The Indispensible Chomsky. New York: Vintage.

Doganis, R. 2001. The Airline Business on the Twenty-first Century. Routledge

Friedman, T.L. 2005. The World Is Flat: A Brief History of the Twenty-first Century. New York: Farrar, Straus and Giroux.

Grossman, G. and Helpman, E. 2005. Outsourcing in a Global Economy. The Review of Economic Studies, 71(2), pp.135-159.

Halliday, F. 2000. Globalisation and its Discontents. Irish Studies in International Affairs, 11(1), pp.233-245.

Hanlon, P. 2007. Global Airlines. Competition in a transnational industry, Third Edition. Sage

Hart, R.A. 1975. “Interregional economic migration: some theoretical considerations (Part I)”. Journal of Regional Science, 15 (2), pp. 127-138

Hawken, P., Lovins, A. and Lovins, H. 1999. Can Capitalism Go Natural? A Review of Natural Capitalism: Creating the Next Industrial Revolution. New York: Little, Brown and Company.

Levine, M.E. 2002. “Price discrimination without market power”. Yale Journal on Regulation, 19(1), pp. 1- 36.

Strategic Management: Retail And Civil Aviation Industry

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Executing Strategy In Aviation Management

Executing Strategy In Aviation Management.

Question:

 
 

Answer:

Introduction

US Airline industry has been struggling in the past to earn sizable revenue and book profits for itself. Over the year rise in the number of low cost airlines such as South west Airlines, Jet Blue, Air Tran Airways and Virgin America are causing big trouble to the industry heavyweights such as United, Delta & American Airlines (Goetz & Sutton, 2017). The new entrants are focussing on how to bring the prices down for the Passengers and in a bid to do so , a price war has already began in the US Airline industry, with every player reducing its fares to take a pie from the market. The new entrants are using non- union labour, flying only one kind of Aircraft and have been focussing on the most lucrative routes, which brings down its flying cost to minimum, thus passing on the benefit to the customers (Ciliberto, Cook & Williams, 2017).  To add on the misery of large Aircraft flyers is the Internet, travel sites such as Expedia, Travelocity and Orbitz are making it easier for consumers to compare the price of all the Airlines and choose the most economic deal (Choi, Lee & Olson, 2015).

The underlying purpose of the assignment here is to do a competitive analysis of the US Airline industry and find out the reasons for its low profitability, and the advantages and disadvantages of using the Porter 5 forces framework. It has been also observed in the case that the business of US Airlines is cyclical in nature; the reason for the same will be understood in the report. Towards the end, certain strategies have to be recommended to improve the chances of the airline to ensure profitability sustainability.

Overview of US Airline Industry

The US Airline industry is dominated by a number of players operating in the high price and economic zones. United Airline, Delta airline and American airline form the big boys club, whereas Southwest, Virgin, Jet Blue and Air Tran form the economic club. The situation presently in the US Airline industry is the sluggish growth rate and the rampant price war which is seriously damaging the profitability of the Airline industry (Tan, 2016).

It has been pointed that the fuel prices are on surge and so are the labour cost, both of them together account for almost 58% of the cost, hence, the increase in the cost is significantly impacting the profit sustainability of the industry. The era of 2000-2010 saw a number of mergers, viz,merger of Delta and Northwest airlines, merger of United and Continental airline and plan of South west airline to acquire AirTran, moreover a number of Airline have applied for Bankruptcy which can be seen as a fear gripping the US Airline industry(Rupp & Tan, 2017)

The present scenario also has a silver lining attached to it, there has been considerable improvement in customer service, loosing fewer passengers and losing less baggage. The US Airline is on a mission to rejuvenate the sector and turn the tables and post solid profits in the coming financial year. Almost all the Airlines are on an improvement spree and special attention has to be put on time arrivals.

Five Force Analysis of the US Airline Industry

Porter 5 forces model is one of the fundamental tools to analyse the competitive landscape of the business, it uses 5 forces to determine the competitive intensity and there helps to make an estimation of the profitability and the attractiveness of the industry in terms of profitability (Dobbs, 2014). The utility of the model lies in the fact that, organization can leverages on the strong position and improve on a weak point, thus preventing itself from taking wrong decisions in the future. Porter created the model to make organization understand that they have to keep a close watch on the rivals, at the same time look beyond their actions and focus on what could impact the business environment (Rothaermal, 2015). Based on the above mentioned rationale the Porter 5 forces are created to understand the business environment in terms of Profitability:

The current population of US is .326 Billion which is spread across 50 states and two federal district and around 84% of the US population lives in Urban cities, the data is self-sufficient to understand the intense competition in the Airline industry. The demographic, behavioural and psychographic segmentation point towards a large amass of people flying in daily to different states and abroad, implying intense competition in the airline industry. Big airlines like Delta and United fly more or less on the same route and the amenities are more or less similar, provided people are flying economic. In premium sections the difference is easily noticeable. The competition can be further understood by seeing the low switching cost of the buyers, passengers have an option to switch from one airline to another at a relatively lower price, the penetration of websites like Travelocity, Expedia have made it easier for flyers to compare the price and book a ticket. Big airlines are losing a major chunk of Business to smaller airlines due to low cost, small companies do not opt for Boeing and Dreamliner, thus helping them to work on their cost strategy and pass on the benefits to the customers. It can thus be said that however the competitive rivalry is high; the competition les between the big and small players, price definitely being the deciding factor (Flouris & Oswald, 2016)

Buyers or the customers have a high bargaining power due to the low switching cost, effort required to shift from one airline to other and the development of ticket booking apps which helps the customers to buy the best deal. The third party applications are becoming increasingly popular across the globe and the states, this has jeopardised the earlier business model of Airline Company wherein the people had to enquire about the rates and then book with the Airline. In the present scenario, a buyer can sit in front of the net and within a couple of minutes book the cheapest and best ticket for himself. Additionally, increase in the number of low cost airlines has helped in increasing the bargaining power of customers and they have a wide array of options to choose from. It can thus be said that the Bargaining power of customers is high in the US Airline industry (Hannigan & Hamilton, 2015).

Bargaining Power of Suppliers

There are just two Aircraft Suppliers Airbus and Boeing, which have a plethora of Airlines to support, which increases their bargaining power. Further, the fuel cost is controlled by only handful of suppliers and market economy, thus the Airline industry has no direct control over the price of White petrol and Jet fuel, further increasing the bargaining power of the suppliers. Labour cost is controlled mostly by the labour union, thus it can be said the bargaining power of the suppliers is high in the US Airline industry (Grant, 2016).

The airline industry requires a massive upfront investment and has to go on a lengthy learning curve, which makes it difficult for a new player to enter the industry space. It has been observed that no single airline have forayed in the 21st century have a market share more than 2%, leaving behind Southwest Airlines. The government regulation on the new Airline further puts obstacle in the entry of new players, additionally immense operating costs further makes it difficult for new players to enter in the Industry space (Holloway, 2017).

A number of players like Jeff Bezos, Richard Branson and Elon Musk are looking for ways to enrich the experience of customer and help them to travel at an unimaginable speed. Projects like Blue virgin and Tesla are some of the significant contribution in the direction. However, at present, nothing substantial has been done in the direction and Airplanes are the fastest means to commute. However, the industry can face stiff competition from Elon Musk’s Hyperloop which is a great mode of transportation for shorter distance. Until then, the Airline industry is safe and has no threat from any of the substitute product.

Hence the market is both attractive and profitable, the finding of the Porter 5 force model can be summarised as:

Bargaining Power of customers

High

Bargaining Power of Suppliers

High

Competitive Rivalry

High

Threat of Substitutes

Low to Medium

Threat of New Entrant

Low to Medium

Porter Five Forces Model-Advantages and Disadvantages

The model which was founded in the year 1979 despite being a useful model to understand the market attractiveness and the profitability has certain lacunae attached with it, hence in order to have a comprehensive understanding of the model, disadvantages of the model have to be discussed as well:

  • Porter 5 forces are a useful framework, but its inability to explain the industry position in the present scenario makes it somewhat inaccurate. The model provides a snapshot of the wider industry at some point in the past, which can help in formulation of a short term strategy, but it fails to deliver a long term strategy for the organization (Solvell, 2015).
  • External environmental factors like Globalization, liberalization and rapid technological advancement were not introduced in 1979; hence the model fails to take into account all the business environmental forces which play an important role in the present scenario (Kharub & Sharma, 2017).
  • A lot of organization use porter 5 forces to a specific company rather than the industry, which thus gives highly inaccurate results. Porter five forces is used to analyse the attractiveness of the industry and not a specific company, but people have been using it towards a specific company is a big disadvantage for the model (Adi, 2017).
  • It is unfair to give equal attention to all the forces, because in practical scenario, one of two forces outweighs other forces, thus wasting the time and resources which are being used in the analysis of five forces.
  • Another big disadvantage of the model is the credibility of information coming from the framework can be compromised by honest mistakes. For example Apple and Nikon are different industries, hence while doing competitive analysis on the Mobile industry one leaves Nikon, but it still is a camera company, which has a significant impact on the mobile phone industry. Thus, the model fails to encompass all the relevant industries while conducting porter analysis.

Advantage of the Model

  • It helps in understanding the forces shaping the industry space.
  • TO a good extent the framework helps in understanding the landscape of the competitiveness and the competition dynamics of the industry.
  • Helps in making decision if the company should enter in the market or not, very useful in creating short term strategy for the company.
  • The model provides an estimation about the attractiveness of the industry in terms of profitability which can be put to use by investors on deciding whether to invest in the business venture or not.

Economic Performance of US Airline Industry

The US airline industry is highly cyclical, which implies that the business depends on the economic growth of the country. During period of economic prosperity people have higher purchasing power and they spend those on discretionary items such as Air ticket, on the contrary when there is a period of economic contraction, people tend to  save money and look for alternatives to travel.

The weakest periods are seen during the quarters ending in the month of March and December when the entire economy is volatile and so is the population’s purchasing power. Due to this Airlines feel the need of short term cash requirements for meeting their operational costs which are caused by the fluctuation in the economy due to the uneven traffic flow. Other factors such as fuel prices, high cost of ticket, inflation and the general economic conditions also affect the Airline industry. Thus, all these factors are responsible for the cyclical business of the US Airline industry, during these tough times, Big Airlines due to their deep pockets are able to sustain in the market, however the maximum impact is felt by smaller Airline service providers(Wensveen, 2018).

It has been mentioned that US Airline is not performing according to its maximum potential, most of the reasons for the low profitability can be substantiated to the low price offering by the low cost Airlines and the evolution and penetration of the ticketing apps which compare the price and gives customers a cheap range of options to choose from while buying a ticket. Some of the strategies which can ensure Profitability in the Airline Industry are:

Upselling services to the customers

These days a number of Airlines are not competing on the Ticket prices but are competing on offering better services to the passengers. Some examples being fast track boarding, lounge access and extra leg room, checked bag fees and many more, the upside of offering such services is that it earns profit for the Airlines and they can also compete in terms of price with other low cost airlines. The year 2012 saw US airlines earning an amount of $ 12.4 Billion USD from such ancillary services (Ater & Orlov, 2015).

A lot of airlines are following the normalcy concept, which is sticking to their core services, transporting passengers from Point A to Point B. However, the ecosystem is changing rapidly and airlines are providing travel solutions rather than just transporting people. People have different needs when they travel, some travel for leisure, some for holidays, some for business meeting and many more, and it is advised that Airline understands and interprets their specific requirement and provide them with customized solutions.

Customers do not refrain from spending money if they find value in the services, hence the airlines have to focus on augmented services and provide value to the customers. It is seen and proven that the companies which are focussing on augmented solutions are doing really well; the same strategy should be implemented by the Airlines to foray into sustained profitability.

US Airline industry is going through a great turmoil owing to the entry of Low cost airlines which are solely competing on the Price strategy, these airlines are giving major Airlines like Delta & United a run for their money. Low cost airlines are carefully planning the route and carrying the business operation with smaller aircrafts which help them to save cost, benefits of which are eventually passed to the customers. However, the Airlines have a good chance to move into sustained profitability if they focus on providing augmented services to the customers besides improving the core service parameters.

Conclusion

US Airline industry comprises of Low cost Airlines like AirTran, Jet Blue & Southwest and high cost Airlines like United & Delta, however the low cost Airlines are doing fairly well in comparison to the latter. It has been possible due to growing penetration of ticketing apps which provides the customers with the cheapest solution to fly and the economic fluctuations in the US economy. At the same point in the time, the Porter five forces analysis of the industry is attractive in terms of the profitability, despite high competitive rivalry, high bargaining power of suppliers and the customers. In the recent past the Airline industry is bringing a lot of radical innovation to move into the path of sustained profitability, they are providing ancillary services to earn revenues. At the end, it can be said that cost leadership and service differentiation can change the shape of US Airline industry and help them in sustaining the business momentum

References

Adi, B., 2015. An Evaluation of the Nigerian Telecommunication Industry Competitiveness: Application of Porter’s Five Forces Model. World, 5(3).

Ater, I. and Orlov, E., 2015. The effect of the internet on performance and quality: Evidence from the airline industry. Review of Economics and Statistics, 97(1), pp.180-194.

Atkinson, S.E., Ramdas, K. and Williams, J.W., 2016. Robust scheduling practices in the US airline industry: Costs, returns, and inefficiencies. Management Science, 62(11), pp.3372-3391.

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Hirsch, B.T., 2017. What do unions do for economic performance?. In What do unions do? (pp. 201-245). Routledge.

Holloway, S., 2017. Straight and Level: Practical Airline Economics: Practical Airline Economics. Routledge.

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Executing Strategy In Aviation Management

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