Innovation in Commoditized Service Industries

Question: Discuss about the Innovation in Commoditized Service Industries. Answer: Introduction: Industry analysis helps an organization to develop an understanding of its position and growth in comparison to other organizations operating within the same industry. The size of travel and tourism industry is increasing rapidly and thus has become one of the fastest growing economic sectors across the world. This in turn is responsible for the growth and expansion of airline industry with increase in number of airline passengers on yearly basis. As per the International Air Transport Association (IATA), the size of airline industry has almost doubled over the past decade. The fact can be supported by the growth in revenue of the airline industry from $369 billion to $746 billion from the year 2004 to 2014 (2015 Aviation Trends, 2017). New Zealand has become a part of the global aviation community and thus is in a strong position to take advantage of the growth and development of the aviation sector. The strong economic growth of the country with gross domestic product (GDP) increas ing by 3.6% every year is also supporting the growth and development of its aviation sector (Global aviation market outlook and NZ, 2016). The aviation sector of New Zealand (NZ) accounts for about 11.8 billion to the GDP of the country. The aviation sector of NZ provides services to about 19million passengers across the world with over 32,700 international flights destined for 35 airports in about 24 countries. The industry also provides employment to about 13,000 people domestically and thus supports the economic growth of the country to a large extent (Economic Benefits from Air Transport in New Zealand, 2011). The strategic position of airline industry of New Zeeland can be analyzed and examined through porter five forces model. Porter five forces model is a tool that analysis the level of competition in an industry and helps improving the business performance (Dominick, 2005). The industrial analysis of airline industry of Air New Zealand is carried out through porter five forces model as follows: Bargaining Power of Suppliers: The airline industry has many airlines but the suppliers are only few such as Boeing and Airbus. Thus, bargaining power of suppliers is high for industry as the airline market is dominated by the presence of few giant suppliers (Gillen et al., 2016). Bargaining Power of Buyers: The buyers for the airline constitute entire population of New Zealand and other people from different countries using the airline services. Thus, bargaining power of buyers is relatively high for industry (Gillen et al., 2016). Threat of New Entrants: The airline industry has very high entry barriers due to high investment required to operate in the industry. Thus, threat if new entrants is relatively low for industry (Gillen et al., 2016). Threat of Substitutes: The main substitutes for the airline industry include roads, railways and waterways. However, air transport is still recognized to be the fastest mode of transport and thus threat of substitutes can be regarded to b medium for industry (Gillen et al., 2016). Competitive Rivalry: The competitive rivalry is regarded to be high for airline industry of New Zealand as there are many airlines providing same product and services such as Qantas Airways, Virgin Blue and Emirates. The high competitive rivalry in the airline industry results in lowering the prices and thus impacting the profitability position of industry (Rothkopf, 2009). Business Strategy Air New Zealand is currently emphasizing on making structural changes for increasing its customer base and enhancing its global presence. This is done mainly for growing pressure on the airline industry to reduce costs and improve operational efficiency for achieving competition position in the global market. The airline, in this context, is also focusing on reducing the customer fares by significantly lowering its operational costs through simplifying its products and services. The lower customer fare will help the airline to achieve customer attraction and thereby increasing customer base. The new strategic direction of the airline is to achieve long-term sustainable growth through maximizing value delivered to its customers, employees and shareholders (Dominick, 2005). The company is also aiming to enhance its operational efficiency through adopting strong corporate governance policies that guides carrying out daily operational activities of the company. The company has written po licies and procedures for conducting its business operations and also to meet disclosure requirements of IFRS (International Financial Reporting Standards) (AIR NEW ZEALAND Annual Financial Results, 2016). The company has adopted an effective system of risk management and internal control for operating its business functions efficiently through effective management of internal risks. In addition to this, the company is also presently emphasizing on implementing changes in its organizational culture to develop and maintain a healthy workplace environment. For this, the airline is focusing largely on developing diverse workforce with increase in female representation and has set a target to achieve 40% womens on the Senior Leadership Team (SLT). The airline has also established some key metrics and diversity dashboard for developing a better understanding of areas of opportunities in relation to create an inclusive and collaborative culture (AIR NEW ZEALAND Annual Financial Results, 2016). References 2015 Aviation Trends. 2017. Retrieved April 7, 2017, from https://www.strategyand.pwc.com/trends/2015-aviation-trends About Air New Zealand. 2017. Retrieved March 27, 2017, from https://www.airnewzealand.com.au/corporate-profile AIR NEW ZEALAND Annual Financial Results. 2016. Retrieved April 7, 2017, from https://p-airnz.com/cms/assets/PDFs/air-new-zealand-corporate-governance-statement-2016.pdf Dominick, M. 2005. Air New Zealand: Strategic Analysis and Recommendations. GRIN Verlag. Economic Benefits from Air Transport in New Zealand. 2011. Retrieved April 7, 2017, from https://www.iata.org/policy/Documents/Benefits-of-Aviation-New-Zealand-2011.pdf Gillen, D. et al. 2016. Liberalization in Aviation: Competition, Cooperation and Public Policy. Routledge. Global aviation market outlook and NZ. 2016. Retrieved April 7, 2017, from https://www.scoop.co.nz/stories/BU1609/S00523/global-aviation-market-outlook-and-nz.htm Rothkopf, M. 2009. Innovation in Commoditized Service Industries: An Empirical Case Study Analysis in the Passenger Airline Industry. LIT Verlag Mnster.