American Airlines Inc Revenue Management Case Study Solution

American Airlines Inc Revenue Management is currently one of the biggest food chains worldwide. It was founded by Ivey in 1866, a German Pharmacist who first launched "FarineLactee"; a combination of flour and milk to feed babies and reduce mortality rate. At the same time, the Page bros from Switzerland likewise discovered The Anglo-Swiss Condensed Milk Company. The 2 ended up being rivals initially however in the future combined in 1905, resulting in the birth of American Airlines Inc Revenue Management.
Business is now a multinational company. Unlike other multinational companies, it has senior executives from different nations and tries to make choices thinking about the whole world. American Airlines Inc Revenue Management presently has more than 500 factories worldwide and a network spread throughout 86 countries.

Purpose

The function of American Airlines Inc Revenue Management Corporation is to improve the quality of life of people by playing its part and offering healthy food. It wishes to help the world in shaping a healthy and much better future for it. It likewise wants to encourage individuals to live a healthy life. While ensuring that the company is prospering in the long run, that's how it plays its part for a better and healthy future

Vision

American Airlines Inc Revenue Management's vision is to offer its clients with food that is healthy, high in quality and safe to consume. Business visualizes to establish a trained workforce which would help the business to grow
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Mission

American Airlines Inc Revenue Management's objective is that as currently, it is the leading company in the food industry, it believes in 'Good Food, Great Life". Its objective is to provide its customers with a range of choices that are healthy and best in taste. It is focused on supplying the best food to its customers throughout the day and night.

Products.

Business has a wide range of items that it provides to its clients. Its products include food for babies, cereals, dairy products, treats, chocolates, food for animal and mineral water. It has around four hundred and fifty (450) factories worldwide and around 328,000 staff members. In 2011, Business was listed as the most rewarding organization.

Goals and Objectives

• Keeping in mind the vision and mission of the corporation, the business has actually laid down its objectives and goals. These goals and goals are listed below.
• One objective of the company is to reach no garbage dump status. (Business, aboutus, 2017).
• Another goal of American Airlines Inc Revenue Management is to lose minimum food throughout production. Frequently, the food produced is squandered even before it reaches the consumers.
• Another thing that Business is working on is to improve its product packaging in such a method that it would help it to lower the above-mentioned complications and would also ensure the shipment of high quality of its products to its consumers.
• Meet global standards of the environment.
• Construct a relationship based on trust with its customers, service partners, workers, and federal government.

Critical Issues

Recently, Business Company is focusing more towards the strategy of NHW and investing more of its revenues on the R&D innovation. The country is investing more on acquisitions and mergers to support its NHW strategy. Nevertheless, the target of the company is not attained as the sales were expected to grow greater at the rate of 10% annually and the operating margins to increase by 20%, given in Exhibit H. There is a requirement to focus more on the sales then the innovation technology. Otherwise, it might result in the decreased earnings rate. (Henderson, 2012).

Situational Analysis.

Analysis of Current Strategy, Vision and Goals

The present Business strategy is based on the principle of Nutritious, Health and Wellness (NHW). This method deals with the idea to bringing modification in the client preferences about food and making the food things much healthier concerning about the health issues.
The vision of this strategy is based on the secret method i.e. 60/40+ which merely suggests that the items will have a score of 60% on the basis of taste and 40% is based on its dietary worth. The items will be made with extra dietary worth in contrast to all other products in market gaining it a plus on its nutritional material.
This technique was adopted to bring more tasty plus healthy foods and beverages in market than ever. In competition with other business, with an intent of retaining its trust over consumers as Business Company has actually gotten more relied on by clients.

Quantitative Analysis.

R&D Costs as a percentage of sales are decreasing with increasing real quantity of spending reveals that the sales are increasing at a greater rate than its R&D spending, and enable the company to more spend on R&D.
Net Revenue Margin is increasing while R&D as a percentage of sales is decreasing. This indication also reveals a green light to the R&D spending, mergers and acquisitions.
Debt ratio of the company is increasing due to its costs on mergers, acquisitions and R&D development instead of payment of financial obligations. This increasing financial obligation ratio position a hazard of default of Business to its investors and could lead a decreasing share rates. In terms of increasing debt ratio, the company must not invest much on R&D and ought to pay its current debts to decrease the threat for investors.
The increasing threat of financiers with increasing debt ratio and declining share prices can be observed by huge decline of EPS of American Airlines Inc Revenue Management stocks.
The sales growth of company is also low as compare to its mergers and acquisitions due to slow understanding structure of consumers. This slow development also impede business to additional invest in its mergers and acquisitions.( Business, Business Financial Reports, 2006-2010).
Note: All the above analysis is done on the basis of calculations and Charts given up the Exhibits D and E.

TWOS Analysis

2 analysis can be used to derive different methods based on the SWOT Analysis provided above. A short summary of TWOS Analysis is given in Display H.

Strategies to exploit Opportunities using Strengths

Business needs to present more innovative products by large quantity of R&D Costs and mergers and acquisitions. It might increase the market share of Business and increase the earnings margins for the company. It might likewise supply Business a long term competitive benefit over its competitors.
The international expansion of Business need to be focused on market catching of developing countries by growth, attracting more customers through client's commitment. As developing nations are more populated than developed countries, it could increase the client circle of Business.

Strategies to Overcome Weaknesses to Exploit Opportunities

American Airlines Inc Revenue Management needs to do careful acquisition and merger of organizations, as it could affect the customer's and society's understandings about Business. It needs to obtain and merge with those companies which have a market track record of healthy and healthy business. It would improve the perceptions of consumers about Business.
Business must not just spend its R&D on development, rather than it must also concentrate on the R&D spending over assessment of expense of different nutritious items. This would increase cost effectiveness of its products, which will lead to increasing its sales, due to decreasing prices, and margins.

Strategies to use strengths to overcome threats

Business should move to not only developing however also to developed nations. It must widen its circle to different countries like Unilever which operates in about 170 plus nations.

Strategies to overcome weaknesses to avoid threats

American Airlines Inc Revenue Management must sensibly manage its acquisitions to prevent the threat of mistaken belief from the consumers about Business. It ought to acquire and combine with those countries having a goodwill of being a healthy company in the market. This would not only improve the perception of consumers about Business but would also increase the sales, earnings margins and market share of Business. It would likewise enable the company to use its potential resources effectively on its other operations rather than acquisitions of those organizations slowing the NHW strategy development.

Segmentation Analysis

Demographic Segmentation

The market segmentation of Business is based upon 4 elements; age, gender, earnings and profession. Business produces numerous products related to children i.e. Cerelac, Nido, and so on and associated to adults i.e. confectionary items. American Airlines Inc Revenue Management products are rather affordable by nearly all levels, however its major targeted consumers, in terms of income level are middle and upper middle level clients.

Geographical Segmentation

Geographical division of Business is composed of its presence in almost 86 countries. Its geographical segmentation is based upon two primary factors i.e. typical earnings level of the customer in addition to the environment of the area. Singapore Business Company's division is done on the basis of the weather condition of the area i.e. hot, warm or cold.

Psychographic Segmentation

Psychographic segmentation of Business is based upon the personality and life style of the consumer. Business 3 in 1 Coffee target those clients whose life style is quite hectic and do not have much time.

Behavioral Segmentation

American Airlines Inc Revenue Management behavioral segmentation is based upon the mindset knowledge and awareness of the consumer. For instance its extremely nutritious products target those clients who have a health mindful mindset towards their intakes.

American Airlines Inc Revenue Management Alternatives

In order to sustain the brand in the market and keep the customer undamaged with the brand, there are 2 alternatives:
Alternative: 1
The Business ought to invest more on acquisitions than on the R&D.
Pros:
1. Acquisitions would increase total possessions of the business, increasing the wealth of the business. However, costs on R&D would be sunk cost.
2. The business can resell the acquired units in the market, if it stops working to execute its technique. Quantity invest on the R&D could not be revived, and it will be thought about entirely sunk expense, if it do not give prospective results.
3. Spending on R&D offer slow growth in sales, as it takes long period of time to present a product. However, acquisitions provide quick results, as it supply the company currently developed item, which can be marketed right after the acquisition.
Cons:
1. Acquisition of company's which do not fit with the company's values like Kraftz foods can lead the business to deal with misunderstanding of customers about Business core values of healthy and nutritious products.
2 Large spending on acquisitions than R&D would send out a signal of business's ineffectiveness of developing ingenious products, and would results in consumer's discontentment as well.
3. Big acquisitions than R&D would extend the line of product of the company by the products which are already present in the market, making business unable to introduce brand-new ingenious items.
Alternative: 2.
The Business ought to invest more on its R&D instead of acquisitions.
Pros:
1. It would make it possible for the business to produce more ingenious items.
2. It would provide the company a strong competitive position in the market.
3. It would allow the company to increase its targeted consumers by presenting those items which can be offered to a totally brand-new market segment.
4. Innovative products will provide long term advantages and high market share in long term.
Cons:
1. It would reduce the profit margins of the company.
2. In case of failure, the entire spending on R&D would be considered as sunk cost, and would affect the business at big. The danger is not when it comes to acquisitions.
3. It would not increase the wealth of business, which might offer a negative signal to the investors, and might result I decreasing stock costs.
Alternative 3:
Continue its acquisitions and mergers with significant spending on in R&D Program.
Pros:
1. It would permit the business to present brand-new innovative products with less threat of converting the spending on R&D into sunk expense.
2. It would supply a positive signal to the investors, as the total properties of the business would increase with its significant R&D costs.
3. It would not affect the profit margins of the company at a big rate as compare to alternative 2.
4. It would provide the company a strong long term market position in regards to the business's total wealth as well as in regards to ingenious items.
Cons:
1. Danger of conversion of R&D costs into sunk cost, greater than option 1 lesser than alternative 2.
2. Danger of mistaken belief about the acquisitions, higher than alternative 2 and lower than option 1.
3. Intro of less number of innovative products than alternative 2 and high number of innovative products than alternative 1.

American Airlines Inc Revenue Management Conclusion

Business has stayed the leading market player for more than a years. It has institutionalised its strategies and culture to align itself with the marketplace changes and customer habits, which has actually eventually allowed it to sustain its market share. Business has actually developed substantial market share and brand identity in the metropolitan markets, it is suggested that the business needs to focus on the rural areas in terms of establishing brand name commitment, awareness, and equity, such can be done by creating a specific brand allocation method through trade marketing methods, that draw clear difference in between American Airlines Inc Revenue Management items and other competitor items. Additionally, Business needs to utilize its brand image of safe and healthy food in catering the rural markets and also to upscale the offerings in other categories such as nutrition. This will permit the company to develop brand name equity for recently introduced and already produced products on a higher platform, making the reliable use of resources and brand name image in the market.

American Airlines Inc Revenue Management Exhibits