Scandinavian airlines, SAS, was founded as a consortium of the national airlines of Denmark, Sweden and Norway in 1946, to operate international flights. SAS has been the first airline to fly a route from Copenhagen over the arctic pole to Tokyo in Japan (www.staralliance.com). However, in 1981 the company have had two years of losses in a row after a long period of positive net profits (Ghoshal, 1988). This essay will examine the change of strategy causing a turnaround that made them profitable again.
Table of Contents
1 Introduction
2 Analysis of the internal and external factors
2.1 SWOT analysis
2.2 PESTEL analysis
3 Strategic options for Ryanair
3.1 Cost leadership
3.2 Focus on the domestic market
3.3 Restructuring
3.4 Vertical integration
3.5 The SAS approach
4 Implementation
4.1 First wave - restructuring SAS
4.2 Second wave – enhancing the business model of SAS by vertical integration
5 Strategy evaluation
6 Conclusion
Objectives and Topics
This report analyzes the strategic turnaround of Scandinavian Airlines (SAS) in the 1980s, examining how the company navigated a period of financial distress through restructuring and the implementation of a service-oriented business model focused on business travelers.
- Strategic analysis of internal and external business environments using SWOT and PESTEL frameworks.
- Evaluation of strategic options through the VRIO model, focusing on cost leadership and market positioning.
- Implementation strategies involving corporate restructuring, the "Euroclass" product, and operational adjustments.
- Integration of value-added services through vertical integration to improve customer satisfaction.
- Assessment of strategic effectiveness regarding consistency, consonance, and feasibility.
Excerpt from the book
4.1 First wave - restructuring SAS
The new class called “Euroclass” offered almost all the advantages of a first class but at the price of the economy class. It was specifically designed to meet business customers’ needs. In order to present themselves as a business travel airline SAS aimed at improving their flight frequency. This was accomplished by using smaller airplanes. Thereby their high fixed costs and the over-capacity of the fleet were reduced as well. This concept was called “Eurolink”.
In addition to that they tried to differentiate their business traveller product from the economy flights. SAS achieved that by building lounges in their major hubs, which provided business travellers with telephones, fax machines and a relaxed atmosphere in which they could enjoy their time waiting for their flight.
The employees of SAS were given special attention from the management, as they were seen as the key to a satisfactory customer experience. With the help of direct motivational letters to employees, called “little red books”, which explained the current situation of SAS and their strategy for the future in comic styled drawings and seminars about how to improve customer relations, SAS managed to change the way the employees thought about the company and the way they treated customers. This led to an increase of SAS revenues, but also to a sense of security and therefore a lack of motivation within SAS.
Summary of Chapters
1 Introduction: Provides historical context for SAS and identifies the turnaround strategy following the company's financial losses in 1981.
2 Analysis of the internal and external factors: Employs SWOT and PESTEL analyses to identify the organizational weaknesses and market challenges influencing SAS's strategic direction.
3 Strategic options for Ryanair: Evaluates various strategic paths for the airline, assessing their feasibility and competitive potential within the industry.
4 Implementation: Describes the two-wave execution of the new strategy, covering organizational restructuring and the enhancement of service delivery.
5 Strategy evaluation: Assesses the chosen strategies using Rumelt's criteria of consistency, consonance, advantage, and feasibility.
6 Conclusion: Summarizes the success of the turnaround led by Jon Carlzon while noting the ongoing competitive threats in the airline industry.
Keywords
SAS, Strategic Turnaround, SWOT Analysis, PESTEL Analysis, Euroclass, Eurolink, Vertical Integration, Business Travellers, Cost Leadership, Jon Carlzon, Airline Industry, Corporate Strategy, VRIO Framework, Customer Service, Organizational Restructuring.
Frequently Asked Questions
What is the core focus of this report?
The report examines the strategic transformation of Scandinavian Airlines (SAS) in the early 1980s, focusing on how leadership and operational changes led to a turnaround from financial loss to profitability.
What are the primary themes addressed?
Key themes include internal and external environmental analysis, the application of strategic management frameworks, the importance of leadership, and the implementation of customer-centric business models.
What is the main objective of the analysis?
The goal is to analyze the specific strategic shifts that enabled SAS to survive an economic downturn and restore its competitive position in the European airline market.
Which scientific methods are applied?
The paper utilizes established management frameworks, specifically the SWOT analysis, PESTEL analysis, and the VRIO framework to evaluate strategic options and organizational capabilities.
What does the main body cover?
The main body covers the diagnostic phase (internal/external analysis), the strategic selection process, the two-wave implementation plan, and the critical evaluation of the strategy against performance criteria.
Which keywords characterize the work?
The work is defined by terms such as strategic turnaround, vertical integration, business traveler focus, and organizational change within the airline sector.
Why was the "Euroclass" concept considered significant?
It allowed SAS to offer premium benefits to business travelers at economy prices, effectively differentiating their product to meet the needs of their most profitable customer segment.
What role did Jon Carlzon play in the strategy?
As the leader, he provided the vision and decisive action required for the turnaround, including the drastic step of replacing the management board and motivating the workforce through "little red books".
How did vertical integration benefit SAS?
It allowed the company to offer a more comprehensive service package, including hotel and transfer services, thereby addressing customer needs and increasing competitive advantage.
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- Johannes Walder (Autor:in), 2012, A strategic analysis of Scandinavian airlines (SAS), München, GRIN Verlag, https://www.grin.com/document/212379
