TY - JOUR
T1 - BPM for supporting customer relationship and profit decision
AU - Lau, Henry
AU - Nakandala, Dilupa
AU - Samaranayake, Premaratne
AU - Shum, Paul Kwok
PY - 2016
Y1 - 2016
N2 - Airline industry is one of the hypercompetitive global industries that struggle for survival and growth. Similar to the machinery, food products, hotels, restaurants, and leisure, media, construction materials, road and rail, and electric utilities industries, the airline industry could not achieve high value and returns between 2007 and 2011 (Bradley & Hoshino 2013). During the last four decades to 2010, the ratio of cumulative net post-tax profits to revenue of the airline industry was only 0.1%, which was among the least profitable of all industries (Bisignani 2011, ; Ramsay 2013). Similarly, the weighted average cost of capital (WACC) has always been above the return on invested capital of the airline industry for at least three decades (Pearce 2014). The unique characteristics of perishable seat availability, high aircraft sunk costs, and low marginal costs for adding passengers within the capacity constraints combined to intensify competitive rivalry to limit price and profits. From an industry perspective, almost no company earns attractive returns on investment in the airline industry, mainly due to the five unfavorable competitive forces influencing the industry (Porter 2008). Each airline is in a constant search for ways to improve profit and firm value. Though most companies are familiar with formulating good strategies, they may overlook critical building blocks and thus could result in unsatisfactory profitability and value proposition. For example, Bradley et al. (2013) report that a technology company that prided itself on analytical rigor but never accurately diagnosed and identified a targeted customer group to generate reasonable returns remains a key strategic problem issue. This study develops a CRM BPM model to identify airline customers with different degree of relationship and profit potential, and select the highly profitable customers for developing retention strategy and processes, and convert the less profitable into profitable corporate accounts.
AB - Airline industry is one of the hypercompetitive global industries that struggle for survival and growth. Similar to the machinery, food products, hotels, restaurants, and leisure, media, construction materials, road and rail, and electric utilities industries, the airline industry could not achieve high value and returns between 2007 and 2011 (Bradley & Hoshino 2013). During the last four decades to 2010, the ratio of cumulative net post-tax profits to revenue of the airline industry was only 0.1%, which was among the least profitable of all industries (Bisignani 2011, ; Ramsay 2013). Similarly, the weighted average cost of capital (WACC) has always been above the return on invested capital of the airline industry for at least three decades (Pearce 2014). The unique characteristics of perishable seat availability, high aircraft sunk costs, and low marginal costs for adding passengers within the capacity constraints combined to intensify competitive rivalry to limit price and profits. From an industry perspective, almost no company earns attractive returns on investment in the airline industry, mainly due to the five unfavorable competitive forces influencing the industry (Porter 2008). Each airline is in a constant search for ways to improve profit and firm value. Though most companies are familiar with formulating good strategies, they may overlook critical building blocks and thus could result in unsatisfactory profitability and value proposition. For example, Bradley et al. (2013) report that a technology company that prided itself on analytical rigor but never accurately diagnosed and identified a targeted customer group to generate reasonable returns remains a key strategic problem issue. This study develops a CRM BPM model to identify airline customers with different degree of relationship and profit potential, and select the highly profitable customers for developing retention strategy and processes, and convert the less profitable into profitable corporate accounts.
KW - airlines
KW - customer relations
KW - management
KW - supply chain management
UR - http://handle.uws.edu.au:8081/1959.7/uws:33006
UR - http://www.emeraldinsight.com/doi/abs/10.1108/BPMJ-04-2015-0039
U2 - 10.1108/BPMJ-04-2015-0039
DO - 10.1108/BPMJ-04-2015-0039
M3 - Article
SN - 1463-7154
VL - 22
SP - 231
EP - 255
JO - Business Process Management Journal
JF - Business Process Management Journal
IS - 1
ER -