Business Model Canvas And Generation Marketing Essay

Recker et al. (2009) argues that a business model provides conceptual strategy execution and the alignment of strategies to business processes. Business model provides a logical insight about the methods and procedures that the enterprises use for creating value to the customers (Linder & Cantrell, 2000; Petrovic et al., 2001; Magretta, 2002). The business model canvas helps organizations by providing in-depth analysis of business processes. The organizations use the business canvas model to find the work activities and ordering of work in a systematic manner. The major challenge for the companies today is to attain a sustainable competitive advantage. The Airline industry is a very competitive industry and the companies are trying to provide value added services to its customers but the challenge is still prevailing regarding customer retention. The business model canvas provides an insight for successful strategy formulation, implementation and execution.

Business model canvas has nine building blocks which are key partners, key activities, key resources, value proposition, customer relationships, channels, customer segmentation, cost structure and revenue streams. The information provided by the canvas regarding the products, services, resources and the partners of the company helps in the analysis of the processes and functions for the achievement of organizational goals and objectives. It helps to take into consideration of all the company inputs and creating valued output the customers. It is affected by the external world and other processes other than the business itself.

American Airline is a Subsidiary of AMR Corporation which was came in to being from conglomeration of 82 airlines through joint ventures and acquisition having a largest hub at Dallas/Fort worth International Airport. It has the long history of serving the customers for almost 80 years. It operates with 2500 air craft and an average of 275,000 passengers per day. American Airline is the first confounder of Oneworld network and has code sharing with other airlines such as Airberlin, British Airways, Japan Airlines, LAN Airlines, Fin Air, Alaska Airlines, and Cathy Pacific to provide quality and on the time services to its customers. American Airlines serves 700 destinations in 150 countries through oneworld network.

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Key Partners

American Airline has the primary airline alliance with Oneworld network for serving 700 destinations. American Airline has done code-sharing with other airline services providers such as Airberlin, Japan Airlines, British Airways, LAN Airlines, Cathy Pacific, Fin Air, Alaska Airlines, Air Pacific to provide fastest and quality services to its customer. It helps in risk reduction of switching of customers due to late flights.

The American Airline major suppliers of air planes are Boeing, Airbus, Lockheed, Embraer and Bombraider. The American Airline is one of the largest buyers of Airplanes with 2500 planes currently working. American Airline spends millions of dollar in maintenance of planes. It has authorized vendors for the selling of tickets for the company working as middlemen.

Key Activities

Operations: The American Airline flies about on average 275,000 passengers per day including domestic and international flights by providing best quality services and comfort to its customers. It handles 300,000 pieces of luggage in one flight and cargo. On average in a day there are about 3400 flights of American Airlines inclusive of domestic and international flights. It has hubs in Dallas/Fort Worth, Chicago, Miami and New York.

Marketing and Sales: They have middlemen for the selling of tickets. The customers can also do reservations through online system of reservations. The scheduling and rescheduling of flights is also done through the online system. The marketing is done through billboards near the airports and advertisements. The slogan for marketing used by the company is “Be yourself. Nonstop; we know why you fly.” For American Eagle Airlines, Eagle has become a symbol for recognition and marketing.

Key Resources

American Airlines has 2500 aircrafts for national and international flights. American Airlines has alliance with oneworld network which enables to serve 700 destinations in 150 countries and territories. It’s affiliation with world’s largest airline American Eagle which enabled the company cover 160 destinations and by providing 1500 flights daily domestically and internationally to its customers. It has 87,897 employees working in various countries which are considered as assets for the company. The management employees are 8,453 and the non management employees are 79,444. The employees in US and Canada are 82,514; in Mexico, Central and South America are 4,145 and the Employees in Europe and Asia Pacific 1,238.

Value Proposition

The management of American Airlines focuses on providing quality services and onboard entertainment to its customers. It aims to provide on the time departure and arrivals of the flights. In case of emergency the management of American Airlines arranges an alternative flight to its customers through code-sharing. It provides one stop reservations and ticketing for customer convenience.

There are three classes in the planes as per requirement of the customers such as first class, business class and main cabin. The management does coordination with the alliances as well as customers regarding schedules for easier connections. Its code-share for international and regional flights through oneworld strong network helps to cover more destinations. It has more flexible travel schedule for the ease of customers.

Customer Relationships

A direct relationship is maintained with the customers by offering services and add-ons tailored towards the needs of the customers by the team of American Airlines. There is a proper system for feedback from customers and complaints which can be provided by the customers either online or through their customer complaint number. The online system is made in a way which enabled to make personalized demands online after seat reservation.

Channels

The easiest way provided to customers for finding reservation of seats is online reservation system. The SABRE (Semi automated Business Research Environment) is used by American Airlines for making automated booked reservations. No online booking fee is charged on pre reservations. Customers can reach the company through travel agents as well as they can do reservations and attain the tickets through the concerned airport.

Customer Segments

The targeted customers are middle class and upper middle class. The customers who place high value on comfort and international travel are targeted by the company as well as those who want priority check in preferred boarding and seating.

The customers are segments into three categories as per their needs therefore there are three classes in the airplanes such as First class, Business class and Main cabins.

Cost Structure

The company has focused on building new, lucrative domestic and international networks. The most important cost inherent in business which lead the company lastly to bankruptcy are soaring fuel cost and eroding profits. The company has faced drastic increase in fuel prices which adversely affect the company’s revenues. The company faced a net loss of $1.98 billion in the year 2011 for this reason the company had filed bankruptcy. The code sharing activities are the most expense to the company. The company’s cost structure is adversely affected by US regulations regarding fare and taxes.

Revenue Streams

As the revenue stream provides the sources that gives revenues to the company and helps to develop a pricing mechanism for the services of the company. The service quality and value added services are the factor customers are most willing to pay for. The revenue grew to € 18.23 billion in the year 2011 and 2012. The pricing list shows fixed pricing set by the company. The add-on services contributed most to the revenues of the company and the entertainment services provided onboard to customers. The company attains the largest chunk of revenues from the domestic flights.

New Business Model for American Airlines

The company leaders need to learn and practice the experimentations which are innovative and value added by optimization of resources (Mullins & Komisar, 2009). Initially the ideation for focusing on innovation doesn’t seem to be work out but afterwards through brainstorming the idea then seem to match the opportunity that a business wants to avail (Ansii & Liisa, 2011). Formulation of strategies to develop new innovative ideas for the business requires systematic approach for matching the internal factors with the external factors of the organization (Weihrich, 1982, 1999). The success and failure of a new business model is dependent upon the effectiveness of development, implementation and evaluation of strategic plans.

The major challenge faced by American Airlines is cost reduction and the ways to increase revenues in an uncertain economic environment. The need of the hour is optimization of resources to meet the challenges for competing effectively. The ideation business model approach which is to be used is “Finance Driven” approach by focusing on new revenue streams and cutting down costs. The company should be striving for maintaining quality by providing quality services to its customers and reduce cost on the other hand would be a biggest challenge. In the airline industry there is little margin, increasing revenues and reducing cost would be a great deal for the company. The drastic change in the fuel prices in the last decade has a worse impact on the costs of the Airline Services.

The company has faced bankruptcy in the year 2011, its upcoming challenge to follow the “Finance Driven” approach by reducing cost and find more ways to generate revenue streams for the company. The employees are considered to be the biggest asset for the company, the company should identify the good and least performers and do downsizing. Secondly eliminating the middlemen which are the outsourced personnel for the purpose of reservations and ticketing, the company should handle these matters by itself. The American Airlines can get into the contract with the Arab companies for the provision of fuel and the decided rate; this will reduce the cost to some extent and would reduce the risk of increasing fuel cost unexpectedly by local companies. The company can generate more profits and customers by sponsoring various global events such as cricket matches and Olympics. Company should focus more on online growth system by providing facilities of reservations through mobile account system. They can provide value added services to the customers by integration of mobile with music and video services to its passengers; such strategies would retain the customers and will help in bringing more customers to the company.

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