Strategic Audit

STAND-ALONE PROJECT

MB609 Capstone: Strategic Management

Stand-Alone Project: Strategic Audit (200 points)

You should begin working on the Stand-Alone Project early in the course.  Each lesson provides a benchmark for completing the Stand-Alone Project in a timely manner while working through the course.  You will find this information in the “Stand-Alone Project Benchmark” section of each lesson. (A 10-page response is required for the combination of Parts A, B, and C.)

Instructions: The Stand-Alone Project requires you to perform an in-depth strategic audit of American Airlines, Inc.  The strategic audit is comprised of six (6) parts.  Use the following instructions to guide your research and writing.  Your Stand-Alone Project responses should be both grammatically and mechanically correct, and formatted in the same fashion as the project itself.  If there is a Part A, your response should identify a Part A, etc.  In addition, you must appropriately cite all resources used in your response and document in a bibliography using APA style.  (200 points)  (A 20-page double-spaced response is required for the combination of Parts A, B, C, D, and E.)

These past several years have been troubling times for the airline industry.  Jet fuel prices alone have risen 110% from January 2001 to December 2006, and 133% from January 2007 to July 2008. Each of the largest U.S. airlines including United/Continental and Delta/Northwest, have filed for bankruptcy at least once.  American Airlines (AA) was the only major airline that managed to stay away from bankruptcy for many years.  Despite not having turned a profit in 2004 or the first half of 2005, the company hoped its turnaround plan would start yielding results and put it back on the road to profitability and increased market share. Unfortunately, American Airlines filed Chapter 11 bankruptcy on November 29, 2011, helping to hold off creditors, renegotiate union and labor contracts, pass on pension burdens to the government, etc.  On February 9, 2012, Reuters reported that American Airlines’ creditors’ committee wanted a merger explored, contrary to American Airlines management’s goal to stay independent. American Airlines ultimately merged with US Airways in December 2013.

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You are required to take on the role of a strategic analyst hired before the final merger decision was made. You must suggest ways by which American Airlines could reinvent itself and compete effectively in an industry where the rules of the game changed drastically.  Based on your own research on American Airlines and the domestic airline industry, prepare a strategic audit using the format outlined below.

The following steps are suggested in preparing your strategic audit.

1. Read all of the instructions below and then perform research on American Airlines. Make notes of the information that you will need to use in writing your strategic audit as well as notes that you think will be helpful in making decisions and recommendations.

2. Obtain the information you need (regarding the organization, specific industry, and recent events and changes) using the following resources.

1. The American Airlines website

1. Hoover’s (This can be accessed through ProQuest: Use American Airlines as your search term and limit your search to within the Hoover database.)

1. Articles on ProQuest that are specifically related to the industry or current events regarding the company, including:

Conaway, D., Esq. (2012). American airlines: Who’s flying the plane? Business

Credit, 114(5), 34-37. Retrieved from http://search.proquest.com/docview/1016478509?accountid=45844

1. Other sources of research, which are recommended (but not required), include newspapers, business magazines, news programs, trade journals, etc.

3. Based on the information and insights obtained from your research, apply your knowledge of the concepts and techniques in the textbook, your professional and personal experiences, and your analytical and reasoning skills to critically evaluate the strategic performance of the company (at the corporate, business, and functional levels) and suggest recommendations for future strategic initiatives.

4. In addition, read the Stand-Alone Project Benchmarks in each Assignment to get an idea of how to progress in this strategic audit as you work through the course.

Part A        Situation:  Discuss the following issues related to American Airlines’ situation in 2013.

1. Performance: How has the company performed over the last several years in terms of revenues, profitability, and market share?

2. Strategic Posture

1. Mission: What is the company’s vision/mission statement?
2. Objectives: What are the corporate, business, and functional objectives? Are they consistent with each other and with the mission?
3. Strategies: What strategies has the company employed in order to be able to meet these objectives?  Are these strategies consistent with each other and with the overall mission?
4. Corporate Governance
5. Directors: Who are the directors?  Are they internal or external?  What do they contribute to the corporation in terms of knowledge, skills, and background?
6. Top Management: What persons or groups constitute top management?  How suited is the management team to the achievement of corporate objectives?

Part B        External Analysis

1. Porter Analysis: Perform an in-depth analysis of the firm’s task environment using Porter’s Approach to Industry Analysis.  Analyze the importance and impact of the following five (5) forces.
2. Threat of New Entrants
3. Bargaining Power of Buyers
4. Bargaining Power of Suppliers
5. Rivalry Among Competing Firms
6. Threat of Substitute Products or Services

2. Other Characteristics: Describe at least three (3) other industry characteristics that you think are important and that affect the performance of firms in this industry.

3. Opportunities: Discuss at least five (5) opportunities available to the firm based on the industry analysis.

4. Threats: Discuss at least five (5) threats facing the firm based on the industry analysis.

5. External Factors Analysis Summary: Develop an External Factors Analysis Summary (EFAS Table) for American Airlines listing the five (5) opportunities and five (5) threats described above.  Discuss why you consider these external factors to be important.

Part C        Internal Analysis

1. Core Competencies
2. Description: Describe at least two (2) core competencies that the firm possesses or can develop.
3. Distinctiveness: Are these distinctive competencies?

2. Competitive Position
   1. Current Position: What is the firm’s current competitive position?
   2. Competitive Advantage: Does the firm possess a significant competitive advantage over other firms in the industry?
   3. Sustainability: Can the firm sustain its competitive advantage over the long term?
   4. Strengths: Discuss at least five (5) strengths of the firm based on the competitive analysis.

4. Weaknesses: Describe at least five (5) weaknesses of the firm based on the competitive analysis.

5. Internal Factors Analysis Summary: Develop an Internal Factors Analysis Summary (IFAS Table) for American Airlines listing the five (5) strengths and five (5) weaknesses described above.  Discuss why you consider these internal factors to be important.

Part D        Analysis of Strategic Factors (SWOT)

1. Situational Analysis: What are the most important internal and external strategic factors (Strengths, Weaknesses, Opportunities, and Threats) that strongly affect the company’s present and future performance?  List 12 strategic factors (3 each of the opportunities, threats, strengths, and weaknesses) and discuss the relevance/importance of each to the strategic planning process.

2. Strategic Factors Analysis Summary: Develop a Strategic Factor Analysis Summary (SFAS) Matrix for American Airlines using the strategic factors described above.

3. Review of Mission and Objectives: Are the company’s mission and objectives relevant in light of the above external and internal strategic factors?  Explain.

4. TOWS Matrix and Strategies

1. Matrix: Develop a TOWS Matrix for American Airlines, listing three (3) opportunities, three (3) threats, three (3) strengths, and three (3) weaknesses.
2. Strategies: For each category (SO Strategies, WO Strategies, ST Strategies, and WT Strategies), develop at least two (2) alternative strategies based on these factors; this is a total of eight (8) strategies.

Part E        Strategic Alternatives and Recommended Strategies

1. Strategic Alternatives: What are the major feasible alternative strategies available to the company?  Select and describe the top four (4) strategies that you think upper management should consider as part of the strategic planning process.
   

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2. Recommended Strategies: Which of the above strategic alternatives do you recommend for the organization?  You must make at least two (2) comprehensive recommendations that describe the strategic direction you think the firm should take based on its current situation and issues.  Your recommendations can include corporate, business, or functional strategies based on the facts of the case and your analysis of the firm.  Number your recommendations and group them as applicable (for instance, if you recommend a low-cost business strategy, list any functional strategies that lead to it as sub points).

NOTE:  There is no right or wrong choice; however, you need to justify your recommendations in terms of their impact on the profitability and long-term competitive position of the firm.

3. Justification: Justify your recommendations in terms of their impact on the profitability and long-term competitive position of the firm.  Use the following criteria to guide each of your recommendations.
   1. Relevance: How does the recommendation deal effectively with the strategic issues facing the organization?
   2. Sustainability: How does the recommendation lead to a competitive advantage that is sustainable over the long term?

4. Commentary: Read the following article and comment on the final decision made by American Airlines in 2013. Why do you feel this was a good/bad strategic decision?

Arnold, K. (2013, Dec 22). No. 1 business story of 2013: American airlines merger. McClatchy –

Tribune Business News Retrieved from http://search.proquest.com/docview/1470294132?accountid=45844

Strategic Audit