Basic ways of improving competitivness of a firm (example of Aeroflot Russian Airlines)

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Table of contents


Introduction ………………………………………………………………………..3
Basic ways of improving competitiveness of a firm 4
Conclusions 8
List of references 10

Introduction

In the present millennium, business companies are constantly facing a huge number of competitions. Firms must deal with challenges like how best to come up to their rivals, rapid hi-tech change, the emergence of latest industries and serving their clients. Thus, to stay alive and be successful in the present millennium, the call for building and sustaining competitive benefit will be much greater than ever.
Airline business is a very competitive industry. Currently, in order to carry on and build up, more and more airline firms are seeking for competitive advantages. Normally, for an airline firm, competitive advantage can be gained by two ways: improving client service and cutting down operational expenses.
In this essay, the focus will be on how international airlines firms achieve competitive in the course of quality of service and lower cost. The biggest Russian airlines company Aeroflot is taken as an example for the analysis of the current competitiveness and the ways of its improvement in the short-term and the long-term prospects.
The geographic position of Russia is an ordinary competitive benefit of Russian airlines as regards to the recent Russian ascension to WTO. Actually the question on Russia's ascension to WTO was the question of the competitiveness of Russian firms.
In addition to the benefit of the geographic position, all Russian airlines, including Aeroflot, should progress their quality of service. As
Aeroflot general director A. Okulov once stressed, “This is the only way to confront global world airline alliances”. Only 20 % of Russian airports match the world standards to some extent. The ground-based communications of airports is another necessary provision for the competitiveness of present Russian aviation.

The actual Aeroflot’s strategic directions for development are the following:Increase of traffic volumes and market share Route network development Continuous enhancement of product quality and passenger service Fleet expansion and modernization Extensive use of modern information technologies and innovation-driven development Improvement of Aeroflot Group management system Staff training and career developmentThe main strategy and the supporting approaches are decided based on objectives and criteria driven out from the conclusions of the analysis carried out. The criteria are: • Improve company’s safety; • Customer satisfaction; • Keep up good financial performance. Airline industry is an industry in which are involved a lot of costs. You can divide all costs into four main parts. They are: - Fuel costs - Costs on personnel - Costs of equipment - Costs of repair of equipmentComparing overall costs of Aeroflot and its competitors one can conclude that Aeroflot wins in this component. Aeroflot establishes long-term agreements with its suppliers and it helps sufficiently reduce costs over time.If Aeroflot fails in implementing its main strategy (focused differentiation strategy), it can apply focused low cost strategy as an alternative strategy. This strategy suggests focusing on a narrow market niche and serving these customers at a lower cost and lower price than rival competitors. Aeroflot starts implementing this strategy, if the following events happen: Financial crisis lasts more than one year; Aeroflot fails in implementing focused differentiation strategy;Sharp decline in demand for Aeroflot services. The target audience for this alternative strategy is an economy class, because aiming also at business customers in this case can totally ruin the reputation of Aeroflot as the business airlines. The main aim of this strategy for Aeroflot is to survive in the world crisis with the lowest possible losses. Reaching economy of scale and providing customers with cheap services will attract more customers in the economy class, so one can predict the same effect at which Aeroflot aims in its main strategy-to increase the number of customers, and remain the positive profit margin.Why will this strategy be successful for Aeroflot? - Aeroflot has stable financial base, as its main investor is Russian government; - This strategy will attract new customers and as a result it will increase Aeroflot’s market share at the time of crisis; - Aeroflot has well-established relationships with its suppliers; - Nowadays Aeroflot is the leader in costs competitiveness among market of Russian civil aviation; - Aeroflot gets strong competitive advantage, because it will provide its passengers with higher quality of services in economy class, than its competitors do, and at a lower price (because the main component of quality level for airline companies is the coziness of seats in the plains remain at the same level).Aeroflot is one of the best known brands in this industry and one of the best in providing excellent business class services. Also the company showed brilliant financial performance in the year 2012. Using these key components the company sees merit in launching a grand offensive strategy called Shuriken. Shuriken focuses on economic class flights to achieve a local rather than industry wide competitive advantage. The strategy aims to obtain local cost advantage over competition and increase the company market share and customer satisfaction by involving multiple initiatives: Improve inside view of the economy class flights (seats, food and beverage, customer services) Offer lower price with higher quality of services than its competitors Increase advertising and make the people aware of the additional performance features within the company.