Strategic Management in the Business of In-Flight Entertainment Connectivity

In the aviation and in-flight entertainment connectivity (IFEC) industries, there are numerous innovations. The aviation industry’s massive innovation attempts to improve efficiency by providing outstanding transportation services to clients. Organizations rely heavily on innovation and creativity to reduce operating costs. On the other hand, the IFEC industry strives to provide a positive client experience while onboard (Forbes 190). Wireless and wired technology in the airline business have enhanced this industry. Apparently, airline companies’ recognition of the necessity of offering a pleasant passenger experience has had a favorable impact on the IFEC business. Passenger connectivity during a flight is a major focus, and most airline companies are significantly adopting their technologies (Ige & Odularu 71).

There is no doubt regarding the fact that providing a good customer experience is a strategic marketing strategy that ultimately bolsters sales through customer loyalty. As a result, a company retains its clients and further attracts new ones. For instance, Finnair and Lufthansa have taken major steps to ensure aircraft gives the best customer experience. In 2015, Fannair acquired the A350 XWB aircraft. This airbus aircraft was introduced with an intention of introducing new customer experience. Fannair has still committed in ensuring all its fleet are connected with Wi-Fi by the end of May 2017 since the director claim IFEC is a strategic investment that would significantly reshape the airline industry (Homsombat et al 40).

Market growth analysis

In the beginning, IFEC industry had insignificant achievements. The development began with the provision of entertainment services such as in-flight movies, personal televisions, video entertainment, audio entertainment, and moving map systems. The enhanced innovation in information and communication industry led to the development of connectivity services. For instance, the increasingly use of tablets propelled Lufthansa Technik to unveil a madia trolley that is helpful in charging and storing a maximum of 48 tablets at a single time. These trolley flexible and can be wheeled in and off the aircraft at the convenience of the customer. The primary intention of acquiring the trolley is to facilitate customer connectivity while onboard. Currently, most passengers prefer remaining connected to the other parts of the world while onboard. Some of the connectivity services offered today includes data communication, Wi-Fi, and satellite and internal telephony. Importantly, EFEC industry is advancing at a high pace, and most of the innovations are aiming at ensuring passengers enjoy the in-flight services and come back the next time.

During the passenger experience conference held in Hamburg this year, Mike Moeller, the vice president of sales and marketing of IFEC at Thales said that satellite are becoming online at the advantage of the airline. Another concern is the way IFEC is increasingly embraced by companies which appeals for enhancing efficiency in airlines through connectivity. Major players in this industry include Zodiac Aerospace S.A, Global Eagle Entertainment Inc, Iridium Communications Inc, Gogo, Viasat Inc, Lufthansa Systems AG etc. These companies are committed to ensuring effective entertainment services are offered to the passengers. Some have gone further by inking acquisition agreements which is instrumental in strengthening the financial position of a company (Lawton).

The flourishing of IFEC industry is also contributed by the growth and expansion of the airline industry. Many aircraft are acquired by airline companies to offer transportation services to the ever increasing demand (Nair et al 201). The acquisition of many aircraft implies that new IFEC software and gadgets are installed to enhance the provision of better services. As more breakthrough and technological advances in the airline industry, IFEC sector also does the same. By taking an example of Xiamen Airlines, it is evident that it took strategic measures of contracting Panasonic Avionics to connect fleet of Boeing 787 Dreamliners with IFEC. It was agreed that Boeing 787-8s be connected with in-flight Wi-Fi services and eX3 entertainment system which will be used to offer passengers with high definition screens and audio video entertainment. Hence, most airline companies have increased the efforts of ensuring all their international crafts are well connected with IFEC (Courtney).

Consequently, innovation and development of better facilities are experienced in both sectors. Additionally, globalization and enhanced trade among nations have also sparked increased development in the airline industry and further IFEC. Commerce and trade between nations have bolstered economic status among people hence enabling them to travel to different parts of the world. Moreover, commerce has enhanced movement of people across the world searching business deals. For the airline companies to attract many of these passengers, they imperatively apply other strategies besides reduced transportation costs. Hence a high demand for IFEC services.

Industry analysis based on Porters five forces

IFEC industry requires companies to operate on specific principles that increase the opportunities for success. The most important principles include embracing efficiency and technological superiority and gaining financial strength in responding to rapid change in the industry. The IFEC industry is ever growing, and most changes are embraced to ensure passengers are offered the best experience in-flight (Apex). Most of the changes aim in ensuring entertaining and connectivity services enjoyed by passengers in different places are offered in the aircraft. Notably, these are services that can efficiently be offered by companies who have been in the industry for long. Porter can analyze this industry as follows:

Threat of new entrants

IFEC industry has a limited restriction for the entrance of new players. However, the level of strategic alliances and high cost of establishment hinder new entrants. For now, no regulation is formulated by the government restricting any investor from investing in IFEC industry. The authority only regulates the nature of communication and entertainment devices that can be fixed in a place to enhance the provision of excellent entertaining and connectivity services. These measures are taken to enhance passenger safety.

Bargaining powers of suppliers

The suppliers have significant bargaining powers over their services. This industry is propelled by creativity and innovation. There are very few individuals with qualification and experience to work in this industry. The existence of few experts thus gives them a large bargaining power over the employers. Additionally, suppliers of information technology gadgets are few hence increasing their bargaining powers.

Bargaining powers of buyers

The existence of few airlines which are the purchasers of the services of this industry makes them have significant bargaining powers. Since many companies provide IFEC services, the airline companies negotiate for relatively affordable prices before purchasing the services.

Availability of substitutes

IFEC industry is very competitive. Entertaining services offered to the passengers are similar except the service provider. If a company set high prices for its services, it will be an advantage to the competitor. Simply, there is an availability of substitute in this industry. Because of the availability of alternatives, the price for the services is set based on prevailing market conditions.

Competitive rivalry in the industry

Currently, there is a little competitive rivalry in the industry. Companies collaborate in doing research and development to uncover better and interesting ways of improving passenger’s experience. These collaborations reduce rivalry among firms although marketing and sales promotions strategies are applied to influence targeted customers to purchase the services.

Factors that affect firm’s ability to be profitable in IFEC industry

In most cases, the profitability of the firm’s depends on the management ability to formulate and implement strategic plans appropriately. The management is expected to plan, control, coordinate, reward employees and effectively communicate to ensure organizations systems are properly interfaced and interconnected. In this industry, operational costs are usually high. The hike in operational costs is caused by substantial expenditure on research and developments. Since most of the entertainment and connectivity services depend on innovations, the costs of acquiring the supplementary technologies are usually high. Thus the management is imperatively required to formulate realistic and achievable plans. Operational expenses are also expected to be minimized to so that revenue generated can exceed production, administrative and operational costs. Poor administrative practices adversely affect the competitive edge of companies which may downsize profits. In the long run, a company can lose its customers to the rivals hence collapse (Indetie).

Furthermore, the developments in this industry are very high. Companies work hard to enhance continual creativity and innovations. Innovation is mostly achieved through strategic alliances. For instance, the strategic alliance between Allegiant and the Global Eagle to assist them expand technological provision. This alliance was instrumental for improving mobile operations, IFEC, operations and customer experience (Grand View Research). Lack of innovative and latest products and services heighten the possibilities of losing the market share to the competitors. A decline in the market share significantly affects the sales volume. Profits will thus shrink because of reduced sales. Therefore, it is through continual creativity and innovation that appropriate and effective communication gadgets can be developed to facilitate the provision of excellent entertaining and connectivity services to the passengers (Barbot et al 270). Innovation is the most important driver that will boost the sales volume to the few customers in the airline industry.

Source of competitive advantage and sustainability of the industry

Notably, this industry in sustained by robust technological developments in the airline and communication industry (Kilinc et al 325). The increased innovation by hardware developers enhances the development of portable and light gadgets and can easily be fixed on in an aircraft. Companies in this industry thus act integrators of the content at a relatively low cost. The reduced production costs aid management to properly budget their finances which are used to acquire best technologies so far.

Additionally, in-flight entertainment and connectivity industry is very competitive. The source of competitive advantage involves intensified creativity and innovation and offers an opportunity for accessing the latest technology. Also, there is strategic collaboration formed between companies (Prince and Daniel). These collaborations helps them undertake joint research which has led to the development of effective entertainment and connectivity products and services that accurately suit passenger’s preferences. One of the most important collaboration was between Gogo and Thales. In these tie-up, an agreement was signed which purposed to enable airlines to apply integrated IFEC products that combines the top connect cabin systems using Gogo connectivity.

Trends that affects skills and assets for the achievement of competitive advantage

Both professional and technical skills are greatly considered before hiring individuals. Most of the roles in these companies require qualified, skillful, talented and experienced individuals. Above all, creativity is preferred then the other requirements follow (Jofre). Employees regularly attend training programs that are organized by companies. These programs impart the required skills in the employees. Since the aviation, communication, and entertainment industries are characterized by continual innovation, employees are regularly trained to keep them relevant. Companies that operate in this industry gain a competitive advantage from a large pool of qualified workers. Also, through training programs plus work experience, workers are well prepared to handle any task. The innovative culture enhances employee’s motivation hence increased commitment. The high level of motivation for providing the best to the passenger’s results into the discovery of better services thus keeping the organization competitively fit (Kenville 34).

Additionally, companies in IFEC industry acquire assets that can be incorporated with new developments. Most of their assets are compatible and enable the installation of current software that supports the transmission of services. Their assets are expensive which deters new entrants into the industry. High-tech assets enable these companies to minimize costs of acquiring new technologies, and the funds are used to cater for other fundamental activities. It is because these technologies allow fixation of the latest discoveries, which act as a strategic advantage (Nhuta et al 433). Company thus use saved money to develop other areas and further charge low rates on their services. Furthermore, some of the important assets like satellites support the provision of services for a long distance. There is no need for acquiring or establishing many boosters provided the available one can last for a long period. In communication and entertainment support equipment mostly serve for many years without replacement. Therefore, the ability of the requisite assets to cover long distance and last for a long period allows companies to concentrate on other areas that result in the provision of excellent services to customers. As a result, companies always retain their competitive edge.

Impacts of this technology on the passengers

Robust innovation is focused on ensuring that both consumers and businesses reap the maximum benefits. Businesses attain efficiency whereas consumers gain satisfaction from services or products offered. The innovation theory of change focuses on enhancing effectiveness in companies. Change is gradual and promotes cessation of activities that become ineffective and adopts practices that positively impact results of most organizations. Technological change is so robust thus businesses usually prepare employees for change by providing training and education, communicating about the importance of change to get support (Kenville 32). Through efficiency in service delivery businesses manages to execute most of their activities based on the initial forecasts within financial projections. Effectiveness is a requisite for success because instances of variation from the projections are minimized.

The provision of IFEC services to the passengers positively impacts on their psychological perspectives. The entertainment services offered through video appeases the passengers. For instance, the BlueBox system provides window movies passengers on its locked i Pads. The Blue Box contains the Wi-Fi which supports surfing of any information and videos on the web. The incorporated communication, social media facilitator gadgets such as Wi-Fi, video modifies the experience by maintaining their social classes (Powell & Robert). Passengers who travel for more than five hours feel it is a two hours journey. For instance, the geographical mapping system which shows the distance covered, areas passed, and the place the plane is going to land keeps the customer informed about the journey.

Therefore, this technology has a positive impact on consumers and makes them feel air flight is the only prestigious and safer place that acknowledges the specialism of consumers and support social interaction and world class entertainment. Passengers can also feel secured incase of any harassment from the crew. Connectivity will allow them to timely communicate their experience through the radar to the crew board and get solved. The enabled communication through Wi-Fi connectivity will make passengers connected to the friends and relatives despite journeying. For instance, this technology has allowed carrying and using communication gadgets during a flight. They have facilitated network connectivity and customers can make calls, visit different sites on the internet and further send text messages.

How the use IFEC services positively and negatively impacts on passengers

Continued provision of IFEC services in flight affects consumers both positively and negatively. The positive aspects of these trends are that consumers feel the worthiness of the fare charged by the airline. Also, consumers who are stressed up and may be attending to a critical issue may be calmed through the entertainment and communication. Communication still continues, unlike the past decade where everything was brought to a standstill until the plane land. IFEC services, therefore, motivates consumers to use plane more than before.

On the other hand, IFEC services negatively affect passenger interactions with other travelers while onboard. It is because passengers concentrate on watching the entertainment services and concentrates in communicating with their friends using their phones. As a result, the plane may land without passengers interacting with others. Also, consumers will expect airlines to be on the frontier line in implementing new technological change in the industry. Failure to incorporate the latest services in the planes may negatively affect the market share of the company. This perception can thus negatively influence consumer purchasing behavior.

Conclusion and recommendation

The tremendous change in the IFEC industry is sparked by technological development in the entertainment and communication sectors. The IFEC industry thus timely incorporates latest changes in their services to ensure customers get the best experience during a flight. Changes in the industry are expected to be a source of motivation for passengers to frequently use air transport not only for travel reason but also for leisure purposes. These services also enhance customer loyalty. By basing on porters analysis this industry is open for entry, has no rivalry among firms, suppliers has more powers, buyers has bargaining powers, and there is the availability of substitute. However, entry is into the industry is restricted by the financial aspects and strong strategic alliances that exist. Since companies rely on innovation to offer products and services, continued investing in research and development has significantly assisted them to maintain their competitive edge hence success.

Recommendation

Despite the wide range of success achieved by companies in IFEC industry, still more and effective strategies need to be formulated and implemented. It is clear that the collaboration among companies in the IFEC industry alone. However, the services provided by this industry targets the airline industry. Thus it is laudable for the key players in IFEC industry to collaborate with the airline industry in undertaking various aspects of research. Collaboration between these two sectors will enhance loyalty, and resources can be harnessed for a common purpose. More talents can be engaged in finding solutions to various influences of the services and possible ways of perfecting. Just from the sentiments of the Global Eagle entertainment, that it is sensitive to understand the content airline wants which can be comprehended through collaborations. The collaboration can create a lasting business relation which can serve two purposes. Firstly, it limits possible entrance of new players in the industry. Secondly, IFEC services will be developed based on airlines and passengers specifications since the collaboration enhances access to relevant data about the market. Therefore, the implementation of this strategy will thus help to maintain the competitiveness of companies in this industry.

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