Current Event Article: How Airlines Cut Cost
Every business organization faces a particular cost structure that determines its total cost. This structure embodies various types of costs that an organization incurs in its different operations. Cost minimization is one of the primary objectives of firms. Thus, organizations must critically evaluate its cost structure to ensure it is able to optimize its objectives with the existing resources. This paper will analyze the article “how airlines cut cost” published by the Economist to demonstrate how technology is effectively applied by business organizations to reduce cost (The Economist, 2015).
Technology has a significant impact on the cost structure of firms. The use of the modern technology enables companies to reduce their operation costs significantly. As a result, the profit goals are efficiently achieved. However, technology impacts long-run costs since the installation of sophisticated equipment involve high cost that may not be recovered in the short run (Thatcher & Oliver, 2001). Airline companies use the modern technology to minimize cost and enhance their efficiency. For example, it has been revealed that the installation of upturned wingtips or winglets on the aircraft helps to reduce fuel consumption by more than 40% (The Economist, 2015). Although the installation of these winglets is expensive to the airline companies, it contributes to significant cost minimization. The application of technology in cost minimization objective of firms allows them to maximize profits, improve the quality of services and products as well as customer satisfaction.
Technology improves the efficiency of the aviation sector which is vital to economic development. Its impact on cost has far -reaching effects on national and international development beside the targeted firm growth. Thus, countries and firms seeking long-term growth should focus on the adoption and integration of modern technology in most of their activities to reduce long-run costs among other important benefits of technology. The information contained in the article is crucial to illuminating to companies and economies on the long-run impact of the use of technology on their growth which can help to address most of the challenges that countries and business organizations are facing.
References
Thatcher, M. E., & Oliver, J. R. (2001). The impact of technology investments on a firm’s production efficiency, product quality, and productivity. Journal of Management Information Systems, 18(2), 17-45.
The Economist (2015). The Economist explains How airlines cut costs. Retrieved January 22, 2017, from http://www.economist.com/blogs/economist-explains/2015/12/economist-explains-12
