Aeroplan Company

AEROPLAN 13

AeroplanCompany

Aeroplan

Introductionof Aeroplan

Aeroplanis a coalition loyalty program or public company under the ownershipand control of the Aimia, which is a global management firm. was founded in 1984, and the main objective was toprovide incentives for frequent Air Canada flyers. In 2005, theprogram went into public trade after the ACE aviation, which was theparent firm sold an eighth of the shares through IPO. The remainingshares got sold in 2008. The program has an approximately 4.6 millionmembers from all over the world(Gibson, 2012).The company operates a marketing firm, and its major area ofspecialization is airline reward services. Itoffers one of the best reward programs for flyers who use Air Canadaand other widely known airlines who are partners of Air Canada.Members of the loyalty program are also allowed to earn points whentheyuse of their credit cards. The company has allocated the credit cardsto AMEX bank of Canada (Gibson,2012).Additionally, the company has operated on the vision of creatingpositive change through the power of partnership.

Sinceits inception in 1984, Aeroplan’s business has been combined withthose of Air Canada. However, in 2002, the company was split up, andit officially became a subsidiary of Air Canada. In 2008, ACEAviation Holdings, the owners of Air Canada disposed of all theirownership in Aeroplan, therefore making Aeroplan self-controlled. Asa result, the company changed its corporate name to Aimia. The newcorporate name was aimed at establishing and marketing the company asa complete and diversified customer loyalty program (CBCNews, 2013).The new corporate name also reflected the numerous retailers who wereparticipating in the program. The company has expanded and now itoperates the Nectar (UK), Air Miles Middle East and AeroplanPrograms. The company has strengths and weaknesses, and opportunitiesand threats that govern its operations and future plans.

Summary of key internal and external factors

Strengths

Opportunities

-High profitability of the company

-Cheap acquisition of employees

-Tremendous growth rates

-Increase in online shopping

-New communication technologies

Weakness

Threats

-Prospect for future competition in loyalty programs

-Competition from other companies in the same industry

-Increase in cases of obesity

-Insecurity and terrorism

-Increase in customer tax

-Increase in tax on airplane fuel

-Increase in oil prices globally

– Increase in interest rates

ExternalAnalysis

Opportunities

Thebusiness has a pool of stakeholders made up of partners, community,shareholders, and partners. The vision statement is instrumental tothe success of the company. First, according to the vision statement,the firm should lead in loyalty management. This also necessitatesdefinition of the needs of the customers. Also a result, the companygets an opportunity to offer specific products to address thoseneeds. The advancement in technology allows the passengersopportunity to accomplish some tasks like online checking in andpurchase of air tickets. Therefore, modern technology presents thecompany with an opportunity to improve the process, reduce processingtime and enhance the accuracy of the transactions.

Threats

Themission statement fails in reflecting all business`s facets and theoutstanding niche of the business. This meant that their missionstatement was meaningless as these makeup the basic components of thebusiness statement. Also, the vision statement fails in definingvalues for Aeroplan. This means that the company cannot be in aposition to define the relationship between customers and the generalpublic. The increase in air passenger tax will reduce the number orair passengers. Also, increased air fuel has the potential ofincreasing plane fuel tax, hence an increase in air transport. Thiswill definitely discourage quite a number of air travels. Also,increased fuel prices, and taxation reduces profitability andincreases travel costs. As a result, the number of airplane partnersand interest rates will increase the capital costs. Also, the obesityand insecurity have the potential of affecting the industry. Due toinsecurity, the company can potentially overcharge the customers soas to account for extra security costs.

InternalFactors

Strengths

Thecompany has strengths and weaknesses that govern its operations andfuture plans. The high profitability of the company is one of themajor strengths of the company. Also, the company has managed toacquire employees cheaply. In addition to this, the company has someof the most experienced employees with only 20% of them having lessthan 6 years of experience. Research has indicated that over 15% ofthe employees have worked with Aeroplan for more than 20 years andtherefore gave the company undue advantage over its competitors.Since its establishment, the Aeroplan has had a tremendous growthrate, which is also a significant strength for the company. Thesestrengths among other have been critically important in ensuring thatthe company acquires a competitive advantage over other loyaltyprogram companies.

Weakness

Theprospect of future competition in the field of loyalty programs is aprimary weakness for the company. This is coupled with theprobability of reduced profitability in the future, as well as thecompetitive market. It is abundantly clear that an increase incompetitors will translate to immense competition in the market.

VRIOAnalysis

VRIOanalysis framework entails a review of the strategic scheme of thefirm. A firm undergoes through strategic process that involvesdefinition of the vision statement, objectives, the internal andexternal analysis, strategic formulation and strategicimplementation. This is aimed at enhancing the competitive advantageof the firm(Barney &amp William, 2012).VRIO framework helps in evaluating resources and capabilities of abusiness regardless of the strategic model used. The competitivepotential checks for Value, Rarity, Imitability, and Organization.The Value evaluates the ability of the firm in exploitingopportunities or neutralizing external threats using the capabilityof its resources. The Rarity seeks for the resource control.Imitability investigates the ease of imitating, through development,duplication or acquisition of the capability or the resource.The Organization determines the readiness of the firm in exploitingthe available resources.

VRIO Analysis for Aeroplan

Resource

Valuable

Rare

Inimitable

Organization

Finance

YES

YES

YES

Realized

Buildings and Equipment

YES

YES

YES

Realized

Human Resource

YES

YES

NO

Realized

Innovation and Creativity

YES

YES

NO

Realized

Reputation

YES

YES

NO

Realized

Finance

Thefirst resource identified for Aeroplan is Finance. Finance isvaluable as it enhances efficient performance of the company. Also,finance is rare since many other airlines in the world are strugglingto get funding to support the operations. In terms of inimitability,there are other similar companies that may tend to get the financespotentially, maybe through grants and soft loans, and follow through.The Aeroplan is well organized. The gross financial assets of thecompany have increased in 2013 despite a reduction of the totalrevenue from 2012. By the end of 2013, Aeroplan had gross financialassets totaling to 476,257,000 Canadian dollars. This is an increasefrom the financial assets of the previous year which were 448,604,000Canadian Dollars.

Therevenue that the company generated in 2013 showed a huge decline.From the 2013 financial statements of the company, the company hadtotal revenue of $1,673.5 million. This is a $575.4 million deficitas compared to 2012’s $2,248.9 million total annual revenue. Thefinancial analysis of the company carried out in 2013 by PWC clearlyindicates the tangible resources in terms of finances of the company.Studies show that the company has a financial resource base whichenables it to operate efficiently and expand its operations to otherregions. The total equity for the company after deducting theliabilities from the assets indicates that the financial status ofthe company is secure. Therefore, the Aeroplan is set to exploit thiscapability and increased other ways of getting finances(Ceng, 2004).

Buildingand Equipment

Buildingand equipment form the second capability through which organizationaleffectiveness is enhanced. This capability of using setting up newbuilding and buying more equipment is valuable to the company,especially because the new building can be used for variousprofitable activities while new equipment necessitate accuracy, speedand quality of various tasks carried out. This capability is veryrare since not many similar companies have the capacity and space forbuilding and new equipment. This is inimitable as other similarindustries can decide to duplicate this work or buy equipment inorder to compete effectively with Aeroplan. In terms or organization,the company has numerous physical resources in terms of buildings andequipment.

Accordingto the financial overview of the table above, the company’sphysical resources in terms of equipment total $ 26,915, 000. Thiswas an increase from 2012`s $ 23, 444,000. The vast majority of theseresources comprise of the computers and office spaces that thecompany has acquired over time. It has adopted sophisticated softwarefor managing data. Micro strategy is the technology that the companysettled for in order to manage its loyalty programs effectively. Thetwo main call centers are also well equipped with modern and up todate technology and equipment that enable the agents to handle theneeds of the clients. The investment in credit cards where memberscan collect miles through the use of credit cards is also a resourcethat generates income for the company (Gibson,2012).

HumanResource

Humanresource forms the third capability of Aeroplan. This capability isvaluable to the company and is considered a powerful resource thatenables it to achieve a competitive advantage over other loyaltyprogram companies. The divisions that exist in terms of managementare vital for the operations of the company. For instance, thecompany has a chairman, Chief Executive Officer, executives, andother employees, as well as agents who work in the call centers(CRHA,2011).

Thisorganizational structure is a vital resource for the company, and itenables the company to get the required competitive advantage. Thecapability is also rare since getting appropriate human resourcerequires proper organization and adequate training. Not manycompanies can be considered to have succeeded in this capacity ofhuman resource. In terms of inimitability, the capability cannot becopied or duplicated as the requirements are variable for eachcompany, hence different training needs for different positions. Thehuman resource is well organized because it represents the resourcesthat the company owns that cannot be copied or emulated by itscompetitors easily. They are the key non-physical resources thatdrive the vision and mission of the company. Human resources are oneintangible resource that this company has invested heavily on. It isevident from research that the employees of the company have vastexperience, and only a small percentage has an experience of lessthan 5 years. The company offers adequate remuneration, as well assufficient job satisfaction for its employees. Research has indicatedthat the company seeks to be the leading employer in Canada (Gibson,2012).This reflects that Aeroplan has decided to invest immensely in thehuman resource capital. Employee engagement is also a criticalelement at Aeroplan Inc. Employee’s opinions is always put intoconsideration when decisions are being made by the management.

Innovationand Creativity

Innovationand Creativity form the fourth capability in Aeroplan. The capabilityis very valuable in Aeroplan. Innovation and creativity form majorcomponents of the company`s operations. The company provides anenvironment that enables its employees to be both creative andinnovative. The use of credit cards to collect miles was a majorinnovation by the company that gave it a much-needed competitiveadvantage. The company uses it`s expertize to build the bestpropriety loyalty programs for the best brands in the world.

Thecapability is very rare since it takes time to train and motivateemployees to be innovative and creative. Not all companies havesucceeded in terms of creativity and innovation. Also, the capabilityis inimitable since it is an intangible resource, hence cannot beimitated. In terms of organization, this is well organized where themanagement of coalition loyalty programs has been done through theuse of the emerging mobile, digital and social communications (CRHA,2011).The company uses innovative ways to unlock customer data and offerthe much-needed customer insights to its clients.

Reputation

Reputationis considered as the most significant capability of an organization,hence valuable. The company has largely been known as the bestcompany offering loyalty program in Canada and overseas. The companybrand, Aeroplan, is known world over. The reputation has made iteasier for the company to acquire numerous customers who join as aresult of the company`s reputation. It is evident that the companyoffers excellent services to its clients and therefore a goodreputation. The capability is also very rare and not inimitable. Evenafter the company changed its corporate name Aimia, research hasshown that the reputation of the company was not damaged. Thecoalition partners are also a major boost towards the company`sreputation. The company is well organized in such a way to meet thestandards established, even for their fellow partners. The company’spartners such as Air Canada and Star Alliance are well known andreputable airline companies worldwide (CRHA,2011).

Strategy

Corebusiness level strategies

Thevalue chain analysis at the company is aimed at adding value to thedata that the company collects on behalf of its clients. The coreaspect of the value chain process is to ensure that the end productof the value addition process is valuable and acceptable by theclient. Aimia focuses mainly on the customer data. The inboundlogistics seek to analyze the data and provide the clients withuseful customer trends, preferences, and shopping trends. With theuse of the Self-Serve software, the company has managed to providedeep insights into the customer`s spending and shopping trends(AIMIA,2008).The inbound logistics also include the use of resources, equipment,skills and knowledge, as well as technology to produce the requiredproduct or service.

Theoperations of the company seek to provide the best services to thecustomers. Customers of the coalition partners must be satisfied. Theoperations involve the analysis of the customer data and theprovision of customer insight information to the clients. Theoperations are well organized and structured with every employee andevery department working on specific tasks. The outbound logisticsinvolve the delivery of analyzed customer data to the clients. Theanalyzed data contains critical information about the customer(Societyof Management Accountants of Canada, 2009).The information contains customer’s location, shopping trends, aswell as the loyalty of the customer and his or her preferences. Theprovision of points to the customers is also a key outbound logisticof the company. The points are rewarded on the basis of the amount aclient spends on the partner companies’ products and services.

Internationallevel strategies

Marketingand sales are the key components of Aimia. The company continuouslymarkets its services worldwide. This is done through banners,posters, radio, and television. It association with Air Canada andStar Alliance has also been a major marketing tool. The company`sprocurement management enables it to purchase products and servicesthat of high quality, and that serve the intention they were intendedfor. The procurement process is a thorough one which contains acomplex process of selecting vendors based on prices, reliability andtheir financial position (AIMIA,2008).The company has over time been in the front line in terms oftechnology. The company`s management employs the modern technologyand current versions of software to analyze customers` data. Theconversion and calculation of reward points are also done throughrecent technological advances.

CorporateLevel Strategy

Themanagement of human resource in Aeroplan has been an important partfor the excellent performance of the company. Employee engagement hasbeen encouraged by the management since the company has beenestablished. The management of the company collects to everyemployee, and their opinions are taken into account during decisionmaking. The remuneration of the employees is also attractive, and theworking environment is motivational (AIMIA,2008).The management has also been keen on enhancing teamwork amongstemployees. This has contributed to the success that the company hasachieved. The general administration of the company is under theflagship of the CEO and the other executives. The chairman of thecompany also plays a major role in the general administration of thecompany. The democratic decision-making process in the company hasbeen extremely successful in engaging all the stakeholders.

Themany years of operation by the company has offered the requiredskills, abilities and knowledge to the company. With over 35% of theemployees having over 10 years of experience and 16% having more than20 years of experience, it is abundantly clear that the company isnot short of skills and abilities. Research has indicated that thecompany hires some of the best-skilled employees and also the oneswith immense experience. Teamwork is a critical component as far ascompany`s operations are concerned. This is a skill that the companylooks after in all it`s over 4000 employees in over 20 countries thatit operates. Leadership skills are another attribute that the companylooks after in its employees. With the innovative culture of thecompany, information technology knowledge is a vital attribute thatthe employees must have. It is also evident that the employees,especially the ones in senior positions, must can travel frequentlyas the need be. The company combines both the tangible and intangibleresources to enhance its performance. Although the tangible resourcesmay be emulated by other rival competitors, the intangible resourcesare the primary of the company`s performance (CRHA,2011).The company uses its competitive human resource capital together withthe physical resources and its finance base to advance itsoperations.

Discussionsand Recommendations

Thestrategies applied have seen a turnaround of operations in Aeroplanand enhanced an increase in profitability. It is through theavailable objectives and strategies that Aeroplan is considered asone of the loyalty programs that have managed to address thechallenges in this sector to a point of acquiring the status of anestablished loyalty management program in the world. This success canbe attributed to the informed strategic management that hasstructured effective mission, vision, and strategic objectives forthe firm. However, as it can be seen from the analysis, the companystill faces threats and stiff competition from other players in theairline industry. This implies that there is still more room forimprovement to maintain that competitive advantage.

References

AIMIA.(2008). GroupeAeroplan Brings Customer-driven Insight and Data Analytics Businessto North America.North America.

Barney,J., &amp William, S. (2012). StrategicManagement and Competitive Advantage: Concepts.Englewood Cliffs, NJ: Pearson.

Ceng,G. (2004). UtilizingTOWS Matrix Analysis and VRIO Structure Approach.Taipei: Zhuan Zhe.

CRHA.(2011). AeroplanCanada Becoming one of Canada’s 50 best employers.Canada.

Gibson,H. (2012). FinancialReporting and Analysis + Thomsonone Printed Access Card.South-Western Pub.

Societyof Management Accountants of Canada (2009).Management for strategic business ideas.Hamilton, Ont: CMA Canada.