Strategic Reengineering and the Airline Industries: an Assessment

No industry can survive without establishing vital linkages with other similarly-inclined industries. Market outlook and the robustness of industries are established with these linkages. Take the case of airline industries. According to Kenneth D. Pritsker of the SAM Advanced Management Journal:

“Through a model based on companies competing in major segments of the air transportation industry, key relationships are identified among industry segments in a way that reconciles internal and external industry views. The model captures business processes, value chains, and interactions that generate end products in order to isolate strategic process issues and strategies to meet them.”

“Over the past 20 years, industries have expanded their boundaries by diversifying into new product areas, by creatively in-sourcing and outsourcing activities, and by entering into innovative cooperative agreements with companies from other industries. This expansion has almost blurred traditional industry boundaries by creating an economy of industries that are tightly interlinked.”

Core elements

Aside from the diversification of manufacturing industries into different product areas where untapped markets are residing, cross-industry interactions are being seen as key for survival. Processes and so-called value-added chains are also part of the larger framework that established the position of industry and engineering in the market.

The point of this approach is that industries are no longer competing largely in the same way that they did after the nineties. In times of crisis, the only way that engineering-dependent firms and industries will survive is when they focus on integrated value chains.

Industry analysis defined

According to Pritsker:

“Industry analysis typically focuses on a company's external dimensions such as its markets, customers, and competitors. Research on industry structure has investigated the influence of economic structure on competition, the advantages of strategic industry control, and the industry factors that influence profitability (Huff, 1982). Another research stream has examined how external changes such as changing customer needs, new technology, government policy, globalization, and economic cycles affect a company's strategy (Hambrick, 1983). The magnitude of external changes over the past 20 years has led strategic planners to develop analytical tools that use external information to help create proactive strategies. As a result, strategies have tended to minimize the importance of understanding the internal industry structure.”

As we can see, Pritsker mentioned the importance of industry control. Industry control entails the complete management and regulation of all branches of production, as well as the rate of flow of inbound profits and assets. Industry control is a fertile and yet largely underdeveloped part of industrial assessment that needs a tight focus to maximize its benefits.

Understanding the value chains

The very next step during industrial assessment is determining the actual dynamics of specific value chains. Horizontal value chains create value. For example, you have fuselage and similar airline components. Another kind of value chain is the vertical value chain. According to Pritsker:

“The second value chain is vertical, which provides the coordination between horizontal chains. An example of a vertical chain would be airplane design where the design activities associated with the airplane's flaps, wings, and tail are coordinated to produce specified flight characteristics in an aircraft.”