OPERATIONS MANAGEMENT

Operations Management

Operations Management

Introduction

This report focuses on the Operations management of the airline Industry and the automotive (car) Industry. Research provide a briefing on key developments in operations design and practice in these two industries to a forthcoming Industry conference.

AIRLINE INDUSTRY

Introduction

Airline is a complex Industry. It involves major capital requirements for aircraft, monitor by government regulations, restrictions and state policy, competitive reaction from other tourist transport and requiring high level of expertise to operate and manage. Airline facing increasing globalization, rising fuel prices, heavy repair & maintenance cost, raising labor costs, increasing competition and requirements for higher service levels and greater flexibility.

The acceptance of China to World Trade Organization and Beijing's winning bid for 2008 Olympics is expected to have a beneficial effect on airline Industry to Hong Kong. However, loosening regulation of China's airline Industry, additional flying routes, stake, merger and alliances increase the competition of Hong Kong airline business.

These significant changes in the market environment and fundamental shifts in customer demands are requiring the operator to re-focus competitive strategy. Apart from achieve low cost or differentiate it by enhancing product attributes in a way that adds value for the customer. Globalization, Airline Alliances, Frequent Flyer Programmes and Integration in tourism sector becomes a commonly adopted ways for airline operators to extend their capacity and market reach.

Market structure for Airline Industry

It is apparent that where a large number of small firms operate in the sector a competitive market exists. In contrast, where a limited number of firms operate, akin to an oligopoly or at the extreme, a monopoly, different conditions affect the supply of transport services. Various criteria influence the competitive conditions in the market, and factors such as the degree of market concentration or price leadership affect the extent and nature of inter-firm competition. In analyzing the airline market condition, a range of criteria needs to be investigated:

the number and size of firms;

the extent of market concentration;

entry and exit barriers;

economies or diseconomies of scale and economics of scope;

costs of capital, fixed capital and costs of operation;

price discrimination and product differentiation;

pricing policies (e.g. price leadership, price wars and market-share strategies).

Oligopoly exists in the Hong Kong airline business where, a limited number of airlines dominate market. Each firm controls its price and output levels and there are entry and exit barriers. An oligopoly market situation is characterized by supply conditions dependent in part upon the output and pricing decisions of competitors. In an ideal world, oligopolies prefer prices to be set at levels where the profits are maximized for all airlines in the market. If the firms colluded to set prices, it could lead to a monopoly and higher profits for producers if they restricted the supply. In an oligopoly situation, the impact of inter-airline pricing and route-sharing agreements to achieve joint profits. In an oligopoly market, airlines can alter output and prices while taking account of their competitors' likely reactions.

Discussion

In overview of airline business, researcher argues that 'although a domestic monopoly or oligopoly structure has been common, ...