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Mkt 571 Week3 Classic Airlines Problem Solving Process

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Mkt 571 Week3 Classic Airlines Problem Solving Process
Classic Airlines
MKT/571 – Marketing
University of Phoenix
Classic Airlines Problem-Solving Process
Classic Airlines, one of the largest airline carriers in the world, servicing
240 cities, and more than 2,300 flights every day is in the service
industry (UOPX Classic Airlines scenario, 2012). Classic Airlines is
making a profit; however, its share prices have decreased 10% in the
past year alone, and its customer base is also on the decline. This year
the company had a net income of 10 million, whereas the previous year
they had a net income of $71 million (UOPX Classic Airlines scenario,
2012). There are numerous internal and external factors contributing to
Classic Airline’s current predicament. Decreasing stock prices, rising fuel
costs, and declining consumer confidence are a few of the challenges
the airline is facing. Additionally, internal disagreement among upper
management is causing a direct problem to the Marketing team. Air
travel around the globe is steadily increasing, and many people fly
because it is necessary, however; minimal research has been conducted
on how stress is related to people who fly frequently (Mawhinney, 2007).
Classic Airlines management must take proactive measures, and
conduct some in-depth research to determine the root cause of the
current dilemmas. The purpose of this paper is to use the nine step
problem-solving process to analyze the situation that Classic Airlines
finds itself confronted with, and further discuss the steps that Classic
Airlines need to take to reach a resolution to their problem.
The Problems
Classic Airlines faces multiple problems, their customer satisfaction,
loyalty, and membership in the classic rewards program has decreased
significantly resulting in a decrease in revenue. The airline is currently
confronted with a decrease in travel from their frequent flyers, and their
customer base is in a deficit. An increase in fuel costs, and high
employee salaries have caused an increase in operating expenses,
resulting in a 61 million decrease in net income within a 12-month time

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frame (UOPX Classic Airlines scenario, 2012). The company’s stock
prices have decreased by 10% in the last year, and employee morale is
dismal.
Following September 11th Classic Airlines along with the entire airline
industry, experienced a major decline in business. Although the airline
has seen a profit, Classic Airlines is familiar with the challenges that
plague today‘s airlines. An examination of the airline’s internal and
external environment reveals that the airline is facing the following
setbacks: lack of stakeholder alignment, especially with regard to its
leadership, and a downward spiral in travel following the events of
September 11, 2001. Classic Airlines and their competitors
overestimated the turnaround of the slump and expanded operations
prematurely resulting in a restrictive cost structure and a competitive
disadvantage against younger airlines. This allows younger airlines to
break into the market taking bigger risks to offer customers what they
want. Uncertainty with regard to flying has affected industry stock prices
for the airline industry. The airline industry operates in what seems like a
bubble, and the entire industry is subject to scrutiny from consumers, the
media, and Wall Street.
The airline has also seen a significant decline in their classic rewards
program, a 19% decrease in the number of classic rewards members,
and a 21% decline in flights for remaining members (UOPX, 2012).
Competitors are able to offer lower prices that Classic Airlines is not able
to match without taking a loss. Additionally, Amada Miller, Chief
Executive Officer (CEO) has stated that there is no room for Classic to
lower its flight prices. Based on the scenario, CEO Amanda Miller has to
report to the Classic Airlines board members, the members are
expecting a progress report that offers a measurable, positive trend
(Classic Airlines Scenario UOPX, 2012). After the marketing team has
outlined the opportunities and alternatives available to the company,
management will have to make decisions, based upon the team’s
recommendation. The decisions that management makes are based on
the key interests for stakeholders.
Making a 15% cost reduction throughout the entire airline over the next
18 months will likely mean a reduction in manpower. Classic Airlines is
currently experiencing its lowest employee morale in history of the
company (UOPX, 2012). One challenge for management at Classic
Airlines is to address any ethical dilemmas that may arise regarding

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