Air New Zealand's Operation Management and Resource Integration

This report provides an in-depth analysis of Air New Zealand's operation management, focusing on resource integration practices, strategic responses, and risk management. It critically evaluates the airline's resource integration management, examining its efforts to deliver quality services, manage operational disruptions, and invest in customer experience and eco-friendly aircraft. The report also analyzes the factors affecting planning, policy development, and resource integration, using models like VRIO and Porter's Five Forces. Furthermore, it assesses the impact of strategic responses on operational objectives, the management of strategic and systematic integration of resources, and the operational and financial risks faced by Air New Zealand, along with its risk management approaches, concluding with a cost-benefit analysis of the airline's operation management strategy.

OPERATION MANAGEMENT

Table of Contents
Table of Contents........................................................................................................................ 2
1. INTRODUCTION.....................................................................................................................1
2. MAIN BODY............................................................................................................................ 1
a. Resource integration management practices of Air New Zealand........................................1
b. Critical evaluation of resource integration management practices of Air New Zealand.........2
c. The general adoption of resource integration and management theory................................3
D. Critical analysis of the factors which affects planning, policy development and resource
integration................................................................................................................................ 4
E. Identifying and critically analyzing the impact of strategic responses...................................7
F. Managing the strategic and systematic integration of resources..........................................8
Developing a practical process to improve resource integration practices..........................10
g. Critical evolution of operational and financial risk faced by Air New Zealand and its
management approaches.......................................................................................................11
h. Cost benefits analysis........................................................................................................13
3. CONCLUSION....................................................................................................................... 16
4. REFERENCES...................................................................................................................... 17

List of tables
Table 1: VRIO model................................................................................................................... 6
Table 2: Risk management of Air New Zealand.........................................................................12
Table 3: Strategic response.......................................................................................................14
Table 4: Strategic response.......................................................................................................14
Table 5: Price of new aircrafts...................................................................................................14
List of Figures
Figure 1: New Zealand Industry analysis.....................................................................................5
Figure 2: Kaizen model for continuous improvements and reduce the waste..............................9
Figure 3: Total Quality Management..........................................................................................11

1. INTRODUCTION
The operation management is the business function which consists of planning,
organizing, controlling and coordinating the organizational resources and is significant to
manage the routine operation with high productivity (Barratt, Choi & Li, 2011). However, the
poor focus on the operation management influence the decision making to a great extent which
increase the chance of business loss (Brown & Bessant, 2013). By considering the importance
of operational management, the present report has been formed by selecting the case of Air
New Zealand which offers air traveling services to the customer. In this context, the present
report aims to analyze the operation management of Air New Zealand to ensure the future
growth with the analysis of the current operation. This has huge scope to ensure to consistent
growth of the business in the national as well as international market. However, the findings of
the report are based on the single case study which might not be applied on different business
cases. In this regard, the resources integration management practices of the firm have been
identified and critically evaluated with the help of different academic theories. Further, the effect
of the firm's strategic concept on resource integration, planning, policy development and its
implementation have also been critically evaluated. Further, the impact of the firm's strategic
response on operational objectives have also been analyzed. Apart from this, the risk faced by
Air New Zealand has been critically evaluated by analyzing the risk management approaches
taken by the firm. Moreover, the cost benefits analysis has been done to justify the operation
management strategy of the firm.
2. MAIN BODY
a. Resource integration management practices of Air New Zealand
According to Kleinaltenkamp et al. (2012), the integration of the resource is crucial for
the firm to gain the sustainable competitive advantages by effectively utilizing each resource of
the firm and creates the value for the firm. In this context, in the case study of Air New Zealand,
several resource integration practices have been found. For instance, the Air New Zealand has
resource integration practice to deliver the quality of services to the consumer by introducing an
innovative way to render the services. By using the intellectual capacity, the Air New Zealand
enhances customer convenience when they are waiting in long check-in queues. However,
some issues by operational disruptions create a barrier for the firm to render the standard
quality services to the customer. For this purpose, the firm targets to increase the consumers'
positive experience by integrating its resources. For example, Air New Zealand will be leasing
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three big passenger aircraft and will change its ordinary schedule to provide continuous air
traveling services to the customer. It helps the firm to decrease the number of flights between
two particular destinations by enhancing the number of passengers in a single airplane which is
significant to reduce the environmental impact as well. It also provides enough time to the firm
for working on the maintenance of the global Rolls-Royce engine. It shows that the firm has
effective resource integration management practices by ensuring the continuity in the customer
services with the scheduled maintenance of Aircraft.
Besides managing the technical issue, the firm invests its financial resources in fulfilling
the demand of expected growth of airline customers through receiving the delivery of ten Airbus
A320 and seven Airbus A 321 NEO. For this purpose, to manage its financial resources, the
firm operates these airplanes on those routes which provide the cost benefits and select those
models of Aircraft which are efficient for fuel saving. Apart from this, Air New Zealand invests in
the development of customer contact center for improving the customers' inflight experience to
deliver effective services. Further, the firm targets to purchase the new environment-friendly
Aircraft to reduce the harmful carbon emission from the extensive air traveling activities. It
shows that the firm integrates its financial resources to deliver the air traveling services to
customers in an eco-friendly manner but highly dependent on the financial resources.
b. Critical evaluation of resource integration management practices of Air New Zealand
On the basis of identification of contemporary resources integration, it has been found
that Air New Zealand is transforming its resources integration processes in order to be first
choice of the consumers which does not even leave one single chance them to switch to
another brand. For this purpose, company carried out the market analysis and found the comfort
of customers is the foremost aspect to increase the competitiveness of the business. Owing to
this, it has planned to remove the queue by using the axiom of "no queues" as a driving force.
However, all airlines use the traditional method wherein customers have to stand in the queue
for check-in which is quite distressing. It is because they have to carry their luggage by standing
in the zigzag queue. By considering the customers on priority, Air New Zealand planned one
more process improvement related to baggage handling process. In this context, several studies
have shown that product or service differentiation is one of the most important key which help
company to stay competitive in the marketplace. It persuade buyers to pay even the higher
charges since they get convenient options which leads to increase their loyalty towards the
brand (Chete, Adeoti, Adeyinka & Ogundele, 2014; Chenet, Dagger & O'Sullivan, 2010;
Gebauer, Gustafsson & Witell, 2011). However, Saleem and Raja (2014) argued that innovation
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and differentiation are costly affair which demand resource capability of the business to be
proactive for bringing the changes in the industry. Therefore, the current resource integration
process of the business strives on the fast delivery of the services wherein business focuses on
the customer satisfaction by offering them convenient services.
According to Chu and Smyrnios (2018) argued that strategic resource integration by
configuration theory helps the company to assign the right resources to fulfill the right purpose
at the right time for achieving the desired outcome. In this context, the Air New Zealand also
realized that it is unable to meet standards because of operational disruptions. In this context,
Bekaert, Hoerova & Duca (2013) stated that operational disruption affect the customer
satisfaction and force them to switch to another brand. In response, the business is planning to
lease more aircraft which help in resolving the existing issues. Furthermore, the regional
expansion is being done through which number of customer will be increased. For instance,
bulk purchasing increases the chances of receiving defected products. It can create the
contingency of substantial financial loss because of the price of one aircraft in billions of Dollars
which can bring the firm near the stage of the insolvent. Not only is this but the company is
going to receive those aircrafts in coming three, four or five years which may increase the
opportunity cost to a great extent. However, Ringle, Sarstedt and Zimmermann (2011) asserted
that balanced expansion is crucial which provide the financial stability and allow business to
handle the current operation. Therefore, it is important for business to also focus on the current
business market by considering its resources capability to ensure the consistent operation.
c. The general adoption of resource integration and management theory
The trade-off situation of the business reflects that scenario which involves losing one
quantity or quality in return for gain in other term for the purpose of adding value to the products
and services (Löfsten, 2014). As per the case study, excellent services quality in term of fast
delivery and offering the services during the pick time by considering the potential requirement
of the buyers. For this purpose, Air New Zealand focuses on the morning and early evening time
to access large mass of passengers and offer them high quality food. However, this add high
cost to the business which might further reduce the profitability in the future time. In this context,
Amit & Zott (2012) asserted that company should make effective strategy to increase its trade-
off in the cost effective manner which help in increasing consumer base and profitability. Apart
from this, redesign of check-in process further added value to services and made it faster than
competitors.
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On the basis of analysis of the case study, the operation disruption affected the standards of the
business to a great extent. This is because customers started switching to another brand which
seems a negative point for the future growth of the business. At this juncture, the strong foreign
players including Pacific Blue, Qantans and Jetstar Airways create threat since the handle their
operation disruption with the non-stop journey. This makes it easier for them to increase the
satisfaction level of buyers (The National Business Review, 2019). This scenario reduces the
trade-off of Air New Zealand since despite incurring huge cost customers think to switch to
another brand. At the same time, it covers comparatively less destination whereby it was low
brand awareness among customers in comparison to global giants (Bradley, 2019). Although,
special routes are being developed by the business in order to do the regional expansion. This
would help in increasing the number of passengers. Apart from this, special routes are
developed to promote the marketing and trade which enable b Air New Zealand to create its
distinct identity in the marketplace (Air New Zealand, 2019). Still, the trade-off is lowest in term
of network expansion and competitive edge at the global level.
D. Critical analysis of the factors which affects planning, policy development and resource
integration
There are several internal and external factors which affects the business environment
to a great extent. In this context, Chittithaworn, Islam, Keawchana and Yusuf (2011) asserted
that mission, culture, organizational structure, policies, customers, competitors, suppliers etc.
are the internal environmental factors which directly affects the success or failure of business.
On the other hand, Demil and Lecocq (2010) mentioned that external factors also affect the
business environment of any organization such as political, technological and socio-cultural
environment etc. In this context, the internal environment of the business has been analysed
with the help of VRIO model and Porter’s five force has been used to carry out the industry
analysis to understand the influence varied factors on the practices of the business.
Porter’s five force analysis
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Figure 1: New Zealand Industry analysis
Babatunde and Adebisi (2012) stated that existence of rivalries in the market place
affects the business growth of relevant companies because customers get several options.
According to Porter’s five forces model, competitive rivalries and threat of substitute is higher in
the airline industry at New Zealand. This is because of the availability of several competitors
including Qantans, Jetstar and Pacific Blue etc. which creates the higher level of competition in
the industry (Owler Inc, 2019). In this context, Keller, Parameswaran and Jacob (2011)
examined that continuous innovation and product development plays a vital role lure buyers. It
was evidenced in case of Air New Zealand where it resigned its process of check-in that
provided ease to consumers which seems as competitive advantage. This tends to reduce the
bargaining power of buyers as well as threat of substitutes since the buyers become loyal
towards the brand. Yet, the bargaining power of buyers remains moderate because international
players are already leading the market with the availability of number of suppliers (Bradley,
2019). However, Dobbs (2014) argued that availability of competitors in the industry increases
the chances of higher competition in quality differences and customer cost.
VRIO Model
The VRIO is an important framework which enables corporation to assess the
competitiveness by assessing the resources capability of the business. This facilitates
corporation to create its unique identity in the marketplace. In this context, Cardeal & Antonio
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Bargaining power of
buyers
(Moderate)
Bargaining power of
suppliers
(Moderate)
Threat of substitutes
(Low)
Existing rivalaries
(High)
Threat of new entrants
(Low)

(2012) asserted that companies with competitive advantage tend to operate with higher
efficiency.
Table 1: VRIO model
Competency Valuable Rare In imitable Non-
substitutable
Conclusion
Customer
loyalty
Yes Yes May be No Competitive
parity
Network
coverage
Yes Yes No No Competitive
disadvantage
Differentiated
services
Yes Yes May be Yes Competitive
advantage
Circumnavigate
the world
Yes Yes Yes Yes Competitive
advantage
Cost reduction Yes No No No Competitive
disadvantage
On the basis of the above framework, the Air New Zealand has the competitive
advantage in the marketplace since its resources capacity is rare which facilitate to make it
unique in the competitive environment. For example, Circumnavigate the world is the effective
strategy which proves to be effective for the corporation in order to meet the expectations of
buyers. Apart from this, resources capability of the business is appropriate which can influence
business to take one or two strategic decision (Bradley, 2019). For example, the cost reduction
strategy does not provide the competitive advantage to the business. Apart from this,
differentiated product is one of the important aspect which help business in getting the
competitive advantage. Owing to this, these factors would be helpful for corporation to derive
the valid outcome.
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E. Identifying and critically analyzing the impact of strategic responses
According to the case, continuous improvements, process redesign and process
improvements, identification of customer's demand, buying and leasing new and heavy aircrafts
etc. are the strategic responses of Air New Zealand for future growth of the business. In this
context, Air New Zealand redesigned the check-in process after the identification of customers
and for this purpose, Air New Zealand using the axiom to reduce the length of queue and stress
level of the customers which is not preferred by traditional airports (refer case study). In this
manner, Noe, Hollenbeck, Gerhart and Wright (2017) asserted that process redesigning helps
the company to influence a large number of customers and create the competitive advantage
against the competitors. However, Wang, Lin and Chu (2011) mentioned that process
redesigning requires the highly skilled and competitive workforce to implement the new
processes. Here, Air New Zealand is adopting a new strategy to launch new direct services in
different locations such as Chicago, Taipei, Auckland, Singapore, Brisbane etc. to increase the
number of customers (refer case study). However, Jimenez, Claro and de Sousa (2014)
predicted that the implementation of new services in various places enhances the overall cost
for the company because it demands the additional resources to maintain the quality of services
in all locations. In this context, it seems difficult to integrate all the service departments of varied
locations and it requires an integrated management system which again demands the technical
sources and skilled workforce to maintain collaboration (Abdelghany, Abdelghany & Ekollu,
2008). For example, the year 2018 was challenging for Air New Zealand because some
operational disruptions made it impossible for business to meet the set standards. Besides this,
Air New Zealand decided to revise baggage-handling processes to make the travel convenient
for the passengers (refer case study). It reflects that Air New Zealand is brining improvements in
baggage handling and improvements in check-in process to increase the number of passengers
and to achieve continuous success in the business.
Capacity plan- To improve the number of customers, Air New Zealand focuses on the leasing
of widebody aircrafts, two Boeing 777-200s and one Boeing 777-300 which helps to maintain
proper scheduling of the flights. Nonetheless, Bazargan (2016) asserted that proper scheduling
of flights can be maintained by the availability of physical and technical resources along with the
proper capacity. In this regard, Fornlöf, Galar, Syberfeldt and Almgren (2016) stated that heavy
aircrafts require huge maintenance cost otherwise it creates the chances of aircraft crash and
leads to huge losses which affect the image of the company. However, to reduce the cost of
maintenance, Aircraft New Zealand is dealing with the Rolls-Royce TEN to avail next-generation
engines (refer case study). According to the case study, currently, the Airline focuses on growth
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strategy and allows the consistent expansion of the profitable network in the next five years
which helps to enhance the 17 million passengers in a year. Furthermore, the company made a
capacity plan to increase 1 million customers in a year and reaching at 19 million customers by
the end of 2020. Further, Air New Zealand has continuously planned to buy new aircrafts to
attract the customers but it found failed to achieve the set standards of Air New Zealand.
However, currently, the Airline is emphasizing on the eco-friendly strategy to influence the
attractiveness of the customers towards airlines. Here, the company is focusing on to purchase
new A321 NEO aircraft to maximize the 25% extra seats, reduction in the use of fuel and carbon
emissions which is enough efficient in comparison to existing A320 domestic aircraft (refer case
study). Although, profitable networks demand the huge investment of capital which poses a
higher financial burden on the company (Graham, 2013). However, Gavazza (2010) stated that
the decision of bulk purchase or blocking the significant capital into one field might affect the
operational efficiency and overall financial losses may be increased. In this manner, it reflects
that Air New Zealand is engaged with new strategic responses for continuous growth as well as
to attain cost-benefit situations. It shows that Air New Zealand is continuously providing the
strategic responses to achieve a higher number of customers and satisfy their demand. By
considering this, the respective changes in capacity planning helps to meet the demand of
customers.
F. Managing the strategic and systematic integration of resources
Integration requires a combination of different sources, forms and processes to create a
link. In this context, lean model is effective for the organizations because it is used to eliminate
the waste, improve the margin and satisfy the customers (Wahab, Mukhtar & Sulaiman, 2013).
Furthermore, lean models support in reducing the time, cost and management of resources in
the organizations. In this context, Kaizen as a lean model is helpful for the Airline to identify the
issues, waste and application of resources at required field to get success in the competitive
environment.
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Figure 2: Kaizen model for continuous improvements and reduce the waste
(Source: Tetteh, 2012)
By considering the Kaizen- as continuous improvement model the organizations
enhances the customers satisfaction and improve the productivity of the business (Tetteh,
2012). In this context, with the help of the Kaizen model, Air New Zealand can do the
continuous improvements in the check-in processes to reduce the time of queue for the public
because inefficiency of check-in process increases the stress level among passengers which
leads to dissatisfaction and shift them towards competitors. Owing to this, Air New Zealand has
planned to avoid the external time wasters and focused to increase the convenience of the
consumers. In this manner, with the help of the Kaizen approach, Air New Zealand apply the
resources according to customers demand to satisfy the demand. Furthermore, as per the case
study, Air New Zealand is planning to offer the new services in different locations includes
Chicago, Auckland, Brisbane, Singapore etc. for the growth of the business. In this manner,
airline is continuously focusing on profitable network expansion over the past five years with 17
million passengers travelling in a year. Furthermore, the company would be able to increase
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