Introduction
Air Canada is a big company offering air travel services to many local and international destinations, including 180 destinations across five continents. It is Canada’s biggest full-service airline, providing scheduled passenger air transport services in the local Canadian market. The firm is an important player in the international air travel industry. The company is not only the largest airline in Canada, but also the biggest in the Canada-US trans-border market. Considering Air Canada’s size and operations, the international business dynamics affect the firm’s operations and profitability, so in pursuit of its business goals and vision, the airline company must realign its business activities to ensure that they work towards the realization of its vision and business objectives, including prioritization of the customers’ satisfaction. This section explores how global international business affects the company’s operations, including the company’s business strategy. The analysis is based on the scorecard standards by which firms design their business operations in line with their visions and business objectives.
Air Canada’s Business Strategy and International Business
Air Canada’s business strategy is based on minimizing costs while at the same time maintaining optimal customer services to achieve sustainable profitability and growth (Banff, 2010; Star Alliance, 2013). In line with this objective the company has adopted various actions aimed at ensuring that sustainable growth is achieved while keeping costs as low as possible. Seeing as the company operates within the global air transport industry which is highly competitive, global business dynamics have played a key role in influencing major decisions, all of which were designed to ensure that the company remained poised on its visions regardless of the challenges (Banff, 2010). To this end, Air Canada’s business strategy is not only informed by the local dynamics in Canada, but also the larger global air transport market. The global air transport regulations and fares have always affected the airline in significant ways, as evidenced by recent actions in which the firm has been trying to increase profitability through cost-cutting strategies (Marowits, 2013).
As Button (2008) notes, globalization, which entails integration of national economies into the unified, global economy, implies that countries and their companies cannot trade in isolation. Instead, global firms such as Air Canada have had to conform to international business regulations such as the ‘social regulation’ and ‘quality regulation’ by US and European authorities respectively, as well the International Civil Aviation Organization standards (Button, 2008). Moreover international regulations on safety, security as well as consumer and labor regulations have affected leading companies in the global airline company, including Air Canada. Seeing as the aforementioned industry dynamics call for strategic decisions, the company has had to realign its business strategies with changes in the industry with a view to circumventing challenges and seizing opportunities presented by such factors as globalization of the airline market. Such realignments in the company, like in many other firms doing business in the global industry, are geared towards the firm’s visions and strategy (Banff, 2010). The realignments have also involved internal and external communications as well as appraisal of organizational performance against its strategic goals and vision.
Air Canada’s Success
In spite of the various challenges in the global air travel industry, Air Canada has been recording impressive results in the recent times. In addition to the significant increase in the global carrier’s fleet size, the company has experienced significant profitability in the recent past (Constantineau, 2013). As it is, this growth is in line with the company’s strategic goal of becoming the global leader in air travel with functional operations in all major cities of the world. The company has been on track in realizing these goals as, according to Banff (2010), Air Canada was the Best Airline in North America ahead of all leading US airlines. Winning such an important award was strategically vital to the airline, especially bearing in mind that the carrier had beaten major companies that had competitive advantages such as capital and economies of scale. The high profit margins reported by the firm (in 2013) are attributed to a series of cost-cutting strategies, including new labor contracts which saw the company decrease its expenditure on pension liability from $4 billion four years ago to $1 billion in 2013 (Constantineau, 2013; CBS, 2012). The airline is also exploring plans to invest in modern jets which use less fuel. Seeing as fuel is one of the most important expenditures in the airline industry, the new fuel-efficient airliners will be fundamental in the firm’s cost-cutting efforts. The cost-cutting initiatives, coupled with acquisition of additional quality aircrafts, have put the company in a good position to realize its growth plans in the international air travel market. As it is, these strategic business actions are influenced by the dynamics of the international business (Button, 2008).
Based on the scorecard paradigm, the leading Canadian airline’s recent significant successes can be attributed to the firm’s strong strategic growth plan and, more importantly, realignment of business activities to conform to its vision (Newswire, 2013). According to the airline’s current chief executive officer, the success achieved despite the various local and international business challenges are as a result of “concerted effort by many of our folks on the operations side and the commercial and finance side” (Constantineau, 2013).
Global Business Activities
The customers for Air Canada, like other international airlines, include tourists, business professionals and diplomats. As such, international business, which is part of economic globalization, affects the firm’s trade (Engelke, 1997). To this end, for example, the airline must align its travel schedules to ensure that they suit its customers who have to travel across borders for business or leisure. Appropriate scheduling can be an important competitive advantage for the airline.
Global Fuel Prices
One of the most important factors affecting performance of airline firm’s is fuel prices. Global fuel prices keep increasing and comprise a significant expenditure for airlines (Button, 2008, Banff, 2010). Moreover, changes in fuel prices lead to changes in global fares. Surviving in the competitive industry amid rising fuel prices calls for adoption of cost-cutting initiatives (Button, 2008). This is necessary especially when a firm is in no position to control such market forces. International business regarding fuel prices and air fare has influenced Air Canada in significant ways. For example, with a view to circumventing the perennial crisis of rising fuel prices, the firm has laid plans to introduce low-cost carriers which spend less fuel (Marowits, 2013). This is aimed at cutting operational costs, and enabling the firm to continue providing high quality flight services without unnecessarily additional operational costs. In addition, other cost cutting plan such as labor contracts are designed to ensure that the firm will continue offering top quality services without having to hike its fares. Such initiatives are meant to keep the firm focused on its vision. It is also worth noting that global air travel regulations play a significant role in determining airfare.
Global Competition
Air Canada operates in a highly competitive and globalized market. According to Button (2008) globalization has brought many companies in a global market where each must cut its niche in order to survive. Some of the main competitors for Air Canada in the global business include British Airways, Air France, American Airlines, Cathay Pacific, Emirates, Japan Airlines and United Airlines (Button, 2008). Seeing as most of these competitors have been in the industry longer than Air Canada, are more capitalized and have economies of scale, Air Canada has had to operate amid stiff competition. This partly explains the airline’s poor performance in the past. However, with recent growth and profitability, the company appears poised to overcome the stiff competition and claim its market share in the industry (Marowits, 2013). Most importantly, competition has influenced the airline’s strategic plan actions such as cost-cutting initiatives and internal performance appraisal to ensure that its customers get optimal services, which would bolster the firm’s competitive advantage.
Conclusion
All in all, global international businesses influence Air Canada’s operations in various ways. The airline has to develop strong strategic plans and realign its business activities with its goals and vision according to the scorecard paradigm. Doing so will ensure that the global carrier remains relevant in the competitive international air travel industry. The firm should explore more cost-cutting initiatives as they have borne positive results so far.
References
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16 September, 2010. Retrieved 2 December, 2013 from http://www.aircanada.com/en/about/media/presentations/documents/cr_speech_100916.pdf
Button, K. (2008). The Impact of Globalization on International Air Transport Activity: Past
Trends and Future Perspectives. Global Forum on Transport and Environment in a Globalizing World, 10-12 November 2008, Guadalajara, Mexico. Retrieved 2 December, 2013 from http://www.oecd.org/greengrowth/greening-transport/41373470.pdf
CBS. (2012, August 8). Air Canada Plan Low-Cost International Carrier in 2013. CBS News.
Retrieved 2 December, 2013 from http://www.cbc.ca/news/business/air-canada-plans-low-cost-international-carrier-in-2013-1.1269807
Constantineau, B. (2013, November 8). Air Canada Enjoying Friendlier Skies. The Vancouver
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http://www.tongji.edu.cn/~yangdy/quick/ch2.htm
Marowits, R. (2013, November 8). Air Canada shares continue to soar on record third-quarter
results. CTV News. Retrieved 2 December, 2013 from http://www.ctvnews.ca/business/air-canada-shares-continue-to-soar-on-record-third-quarter-results-1.1533740
Star Alliance. (2013). Air Canada: About. Retrieved 2 December, 2013 from
http://www.staralliance.com/en/about/airlines/air-canada_airlines/
