Evaluate decision making, centered around the VBM, within a chosen industry. Prepare a problem statement within your specific industry.
we reviewed industrial organization, or market structure, which is the primary economic tool for industry analysis. It provides a framework for relating profitability to demand, level of competition, and firm behavior. Using the economic theory of market structure, identify a component of the market that is a threat to the health of the organization you are looking at.
Organizations face a multitude of challenges. You will find it helpful if you take one challenge and focus on it. For example, is it shifting demand? Or perhaps a new technology that is disruptive and changes the company’s cost structure? Another might be some legislation making its way through Congress that affects the organization’s ability to make certain decisions.
The Context of the Problem
For the problem statement, take the position of the person indicated in the problem scenario you have chosen. Place yourself in that person’s shoes. Given that person’s mandate, whether it be to increase share price, stabilize market share, increase cash flow, or any other goal, how would this leader perceive this challenge? Furthermore, how would a virtuous leader respond to the challenge? For example, the VBL approach talks about framing. How do you frame the problem statement so that it is ethically, as well as strategically, solid?
Investigating the Problem
The more specific the problem statement is, the easier it is to address it. In fact, half the battle is articulating the problem in a short statement. Express it as an “elevator speech,” that is, imagine you meet someone in an elevator and you have 60 seconds to explain your thought before the person reaches their floor. Often, simply thinking about how to put the problem succinctly in words suggest possible avenues for addressing it.
Full Answer Section
Virtuous Leader's Framing:
A virtuous leader would frame this challenge not just as a competitive threat but as an opportunity to adapt and innovate. They would recognize the need to address both the economic and ethical implications of the changing market landscape. Instead of focusing solely on cost-cutting measures, they would prioritize a strategy that:
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Serves the Needs of All Travelers: Acknowledges the increasing demand for budget-friendly travel options and prioritizes providing affordable fares for a broader range of customers.
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Embraces Technological Advancement: Invests in innovative technologies to streamline operations, enhance customer experience, and create new revenue streams.
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Retains a Focus on Value: Reassures customers that the airline offers superior value, emphasizing its commitment to safety, reliability, and customer service.
Elevator Speech:
"The airline industry is facing a significant shift with the rise of low-cost carriers and online travel platforms. These competitors offer lower prices and greater convenience, posing a threat to our market share and profitability. We must adapt to this new reality by embracing technology, streamlining our operations, and ensuring we offer compelling value to all types of travelers."
Investigating the Problem:
This succinct statement highlights the core issues:
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Cost Competitiveness: Legacy airlines need to find ways to reduce costs to compete with LCCs.
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Digital Transformation: Embracing technology to improve customer experience, simplify booking processes, and offer personalized services.
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Value Proposition: Clearly defining and communicating the unique value proposition of the legacy airline to differentiate from competitors.
Potential Solutions:
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Strategic Partnerships: Collaborating with LCCs on certain routes or joint ventures to leverage their expertise and access new markets.
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Cost Optimization: Streamlining operations, reducing overhead, and exploring new business models (e.g., unbundling services).
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Technology Investment: Developing mobile apps, investing in data analytics, and implementing automated processes to improve efficiency and customer experience.
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Enhanced Customer Service: Emphasizing personalized service, loyalty programs, and unique amenities to differentiate from competitors.
Conclusion:
The emergence of disruptive technologies and competitive models within the airline industry presents a significant challenge. However, a virtuous leadership approach that prioritizes adaptability, ethical decision-making, and a customer-centric approach can help legacy airlines navigate this challenging landscape and maintain their relevance in the evolving market.
Sample Answer
Problem Statement: The Threat of Disruptive Technology in the Airline Industry
Industry: Airline Industry
Position: Chief Executive Officer (CEO) of a Legacy Airline
Problem: The emergence of low-cost carriers (LCCs) and the rise of technology-driven travel booking platforms pose a significant threat to the profitability and market share of legacy airlines.
Context of the Problem:
As the CEO of a legacy airline, I am responsible for maximizing shareholder value, maintaining market share, and ensuring the long-term viability of the company. The rise of LCCs and technology-driven travel platforms is a serious challenge, as it disrupts the established business model and threatens to erode our market share. These competitors leverage lower operating costs, streamlined service models, and digital platforms to offer more affordable fares and greater convenience to customers.