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Open University of Mauritius

Master of Business Administration

EXAMINATIONS FOR:

December 2013 - Semester 1

MODULE:

Marketing Management [C8]

DURATION:

3 HOURS

READING TIME:

15 Minutes

INSTRUCTIONS TO CANDIDATES
1.

This paper consists of Sections A and B

2.

Section A is Compulsory.

3.

Answer any Two questions from Section B.

4.

Always start a new question on a fresh page.

5.

Total marks: 100.

This question paper contains 5 questions and 7 pages.

Page 1 of 7

SECTION A Case Study COMPULSORY [60 marks]


A Tale of Two Airlines

Think about the contrasting business strategies for two very different airlines. One is
Ryanair, a very successful low-cost operator now branching out into parts of the
worlds like the USA and Africa. The other is British Airways (BA), a rather successful
full service airline (i.e., one which offers pre-booked eating, meals and drinks, and a
generous supply of cabin crew to cater for each passengers needs.) BA is one of the
few airlines which fly to all six inhabited continents (the others are Delta, Emirates,
Korean Air, Qantas, Qatar, Singapore Airlines, South Africa Airways and United
Airlines).
Ryanair
Based in Ireland (Dublin), Ryanair was one of the first low-cost airlines in the world.
Its business model has since been copied by many others, including Fastjet (Kenya),
Mango (South Africa), PAL Airlines (Chile), JetBlue Airways and Southwest Airlines
(USA), SpiceJet (India), AirAsia Philippines and Cebu Pacific (Philippines), Virgin Blue
(Australia), JetStar Asia and Tiger Airways (Singapore), and Thai Air Asia (Thailand).
All these companies exist at the time of writing this article, but some may have gone
out of business by the time its published, since the whole world of low-cost flying is
very volatile and it takes a long time for any initiative to become established.
Ryanair has copied the air travel juggernaut Southwest's airline model. They are the
largest budget airline in Europe and the company is rapidly expanding.
But in their effort to recreate the success of Southwest, they left out one key ingredient
to Southwests recipe for success: excellent customer service standard. It shows in
Ryanairs experience from the very beginning and comes from the very top.
Because Ryanair is a low-cost operation, it must raise revenue not principally from
ticket sales but from other sources. It charges fees for check-in facilities, for baggage
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and for the purchase of food and drink as part of a but-on-board programme. All
passengers are now required to arrive at their airport with a pre-printed online checkin and boarding pass; if they dont, they will be charged 100 Euros
The complaints about Ryanair are varied. From paying $95 to print a boarding pass at
the airport to paying $80 for bags that were deemed too big by Ryanairs standards.
But it doesnt stop there. Nearly all customers complained about rude employees that
herded, goaded and in some cases, bullied them into compliance of Ryanair policies.
The CEO often sets the standard for customer service for the company. Ryanairs
CEO, Michael OLeary, has an attitude towards the customer that is appalling. It is as
if the fact that they have very cheap flights means that they can not only lack customer
service, but also actually cross the line into abuse.
Here are just a few things he has said about customers in the past: We think they
should pay 60 Euros for being so stupid. (regarding the boarding pass fee)
You're not getting a refund so . . We don't want to hear your sob stories. What part
of 'no refund' don't you understand? (when customers complain and demand a
refund)
Anyone who thinks Ryanair flights are some sort of bastion of sanctity where you can
contemplate your navel is wrong. We already bombard you with as many in-flight
announcements and trolleys as we can. Anyone who looks like sleeping, we wake
them up to sell them things." (regarding the in-flight experience)
Customer Experience is about a mindset. Its about a mission to design and create a
deliberate experience for the people that frequent your company. But the mindset at
Ryanair is combative with customers, made obvious by OLeary time and again. If this
is the example he sets for his team, what results can you expect from the employees?
Unfortunately, as Dr. Muhammad Taufiq Al Sattar, can tell you first-hand, it results in
despicable customer experience. After learning that his wife and three children had
been killed in a fire at his home, he was trying to get an earlier flight home. The surgeon
who is based in Dublin and flies home to see his family on weekends via Ryanair was
charged $253 to make the change to an earlier flight. Ryanair has since committed to
refunding his money. But this may be too little too late in regards to the court of public
opinion.
To be fair, no one is required to fly on Ryanair. If you do, you realize that in order to
have cheap flights you must sacrifice some of the extras. In order to keep costs low
after all, they have to cut somewhere. There is no question that airline travel can be
frustrating, but at the very least, employees could smile and be polite. That doesnt
cost anything. After all, Southwest has built a company on this concept. According to
the American Customer Satisfaction Index (ACSI) scores of 2011, Southwest scored
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81 out of 100, the highest in the industry and 17 points above the second highest
airline. Imagine what the ACSI score would be for Ryanair?
Ryanair is not noted for the quality of its customer service. The Economist has written
that Ryanairs cavalier treatment of passengers had given the company a deserved
reputation for nastlines and that it has become a byword for appalling customer
serviceand jeering rudeness towards anyone or anything that gets in its way. More
specifically, Ryanair has been heavily criticised for its poor treatment of disabled
passengers; for example, in 2002 it refused to provide wheelchairs for disabled
passengers at London Stansted Airport, arguing that the responsibility for doing so
resided solely with the airport authorities.
Ryanair aircraft are delivered with the absolute minimum of luxuries and customer
benefits. The seats dont recline, there are no seat-back pockets, safety cards are
stuck on the back of the seats and life jackets are stowed overhead rather than under
each seat.
These changes allow the airline to save on costs and, more importantly, permit faster
cleaning and safety checks during the short turnaround times (when, incidentally,
every Ryanair employees, including the pilot, is expected to contribute to the cleaning
process).
According to the New York Times, many people hate Ryanair. Enough that the
shareholders in the company are holding the CEOs feet to the fire on how the
company is treating customers as they announce that they may not achieve their
profits forecast.
Companies typically recognize they need to become more customer centric when they
feel pressure in their bottom line. Ryanair is feeling pressure to get more profits, so
OLeary is under pressure to initiate change. In recent articles at the BBC and New
York Times Business News, OLeary admits that they need to address the issues that
unnecessarily annoy the customer. He also takes responsibility for the abrupt
culture that he attributes to his own character flaws. This is a result of pressure from
the shareholders who believe that these transgressions to the customer are affecting
the profits.
British Airways
By contrast, BA emerged from a merger in the 1970s and is very large. It is now
reinforced by a further merger between BA and Iberia (the Spanish national carrier), to
create the International Airlines Group (IAG). Currently, BA flies to 300 destinations
and carries over 30 million passengers a year, with the support of nearly 240 aircraft.
From 1989 to 1996, BA was voted the worlds best airline in Business Traveller
magazines survey. In May 1996, BA implemented a business efficiency plan that
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called for cutting costs by eliminating more than 5,000 jobs. It also sold its ground fleet
services, in-flight catering operations, and landing-gear overhaul unit and scrapped its
Marketplace Performance Unit, which was responsible for getting information about
customer perceptions.
These measures lowered employee morale and inspired the cabin staff union to go
on a 72-hous strike. Customers complained about delays in baggage handling and in
getting responses to their complaints. The planes also started to have technical
problems, which increased customer dissatisfaction.
To improve employee morale and increase customer satisfaction, the operations and
customer service department were combined to improve cooperation between the two
areas, and the company put more emphasis on punctuality and baggage handling. It
entered into an alliance with other airlines such as Qantas to form one world through
which frequent flyer mileage can be accumulated or redeemed, which resulted in cost
sharing at airport terminals.
Two main events have contributed to the current strategy for BA. First, the
privatisation of BA led to the adoption of a new Big Idea in the mission statement,
To Be the Best and Most Successful Company in the Airline Industry. Second were
a strategic turnaround in 1997 and the appearance of a new mission, to address four
key areas:

The global economic climate


The competition
What customers expect
What employees want

After losing its title as the worlds best airline in 1996, BA experienced a number of
problems but they have worked hard to improve their mage and earned first place in
2009. In the mid-nineties, BA initiated a portfolio analysis which defined the level of
criticality of its operations. Based on this review, strategic decisions were taken to
outsource functions (including human resources) that were not seen to be core.
BA has been able to instil commitment and enthusiasm amongst its employees in
delivering outstanding customer service its about employee engagement, its about
High Performance Working, its about employer branding to create the connection with
customers.
More recently, as exemplified in the BA Annual Report for 2009-2010, the company
has set out five main strategic objectives that should transform BA into the worlds
leading global premium airline:

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1.
2.
3.
4.
5.

Become the airline of choice for long-haul premium customers


Deliver outstanding customer service at every touch point
Grow BAs presence in key global cities
Build on the companys leading position in London
Meet customer needs and improve margins through revenue stream

In 2009, BA was awarded the best airline in the world by Business Traveller.
Adapted from Student Focus, April, 2013.

QUESTION 1 [Compulsory Attempt all questions] [60 marks]


(a)

Describe, with examples from the case study, the different marketing
orientations for these two Airlines?
(10 marks)

(b)

(i) Using Porters Generic Strategy model, critically analyse the marketing
strategies adopted by each of these Airlines.
(15 Marks)
(ii) What type of best fit strategy would you recommend for both airlines in order
to sustain the hypercompetitive business environment the airline industry is
facing? Support your answer by relevant examples from the case study.
(15 marks)

(c)

Compare the two airlines Marketing Philosophies in terms of their respective


marketing mix elements with their corresponding customers perspective?
(20 marks)

Page 6 of 7

SECTION B Attempt any TWO questions. Each question carries 20 marks

QUESTION 2
(a)

Describe what you understand by marketing objective in marketing planning


process, and assess the key factors that should be taken into account when
creating marketing objectives.
(5 marks)

(b)

Describe the Ansoff Matrix and, for an organisation of your choice, evaluate
how the strategic marketer might use this model to help determine the
organisations strategic objectives and future direction.
(15 marks)

QUESTION 3
(a)

Discuss the role of intermediaries in the distribution channel and explain how
this role has changed in recent years.
(10 marks)

(b)

Using the travel industry, critically discuss, and illustrate with appropriate
examples, why some organisations might remove intermediaries from their
supply chain while others might add them.
(10 marks)

QUESTION 4
(a)

Describe the concept of the different product life cycles (PLC) and evaluate
their usefulness as a strategic marketing tool. Give examples to support your
answer.
(10 marks)

(b)

Evaluate the market diffusion process and explain how an individual


consumer perceives innovation in a new product launch.
(10 marks)

QUESTION 5
(a)

Briefly explain the five main characteristics unique to service marketing.


(10 marks)

(b)

As the strategic marketing manager of a company of your choice, discuss how


you would measure service quality.
(10 marks)

--- End of Question Paper --Page 7 of 7