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Estonia Air's Big Buy Change Management Analysis & Solution
HBR Change Management Solutions
Innovation & Entrepreneurship Case Study | Karen Popovich, D Lander, Robert Letovsky
Case Study Description
Rait Kalda, vice president of operations for AS Estonian Air, faced a challenge: how should Estonian Air address projected increases in intra-European flight demand in light of high fuel costs, competitive challenges, economic uncertainty, and last year's net loss? If Kalda's assessment led to expanding Estonian Air's fleet, he had to decide which plane model would achieve operational efficiencies, satisfy load factor requirements, and meet various other performance and financial metrics. In order to fully comprehend Kalda's challenge, the case first presents the reader with a brief synopsis of Estonia's economy; the airline industry; and the three types of competitive airline industry groups- legacy carriers, low cost carriers, and regional carriers. This is followed by an overview of Estonian Air's competitors and its opportunities for growth. The case provides detailed information regarding the advantages and disadvantages of the Boeing 737 Jet, the Bombardier Q400 Turboprop, and a used Saab 340A turboprop. Finally, the case summarizes Estonian Air's internal analysis and growth strategy, with pertinent input from conversations between Rait Kalda and the vice president of finance and administration, Andrus Aljas. Students are required to complete an operational analysis on factors such as capacity, fuel savings, and utilization rates. If Estonian Air does indeed decide to expand, the case states that the airline will continue with its past practice of leasing the aircraft. Using current financial statements, as well as information presented in the case, students can also prepare a basic net present value (NPV) model and scenario analysis for leasing each of the aircraft alternatives. Finally, students have the opportunity to combine both qualitative and quantitative factors to support their analysis.
Change Management, Financial analysis, Financial management, Manufacturing , Case Study Solution, Term Papers
What is Change Management Definition & Process? Why transformation efforts fail? What are the Change Management Issues in Estonia Air's Big Buy case study?
According to John P. Kotter – Change Management efforts are the major initiatives an organization undertakes to either boost productivity, increase product quality, improve the organizational culture, or reverse the present downward spiral that the company is going through.
Sooner or later every organization requires change management efforts because without reinventing itself organization tends to lose out in the competitive market environment. The competitors catch up with it in products and service delivery, disruptors take away the lucrative and niche market positioning, or management ends up sitting on its own laurels thus missing out on the new trends, opportunities and developments in the industry.
What are the John P. Kotter - 8 Steps of Change Management?
Eight Steps of Kotter's Change Management Execution are -
- 1. Establish a Sense of Urgency
- 2. Form a Powerful Guiding Coalition
- 3. Create a Vision
- 4. Communicate the Vision
- 5. Empower Others to Act on the Vision
- 6. Plan for and Create Short Term Wins
- 7. Consolidate Improvements and Produce More Change
- 8. Institutionalize New Approaches
Are Change Management efforts easy to implement? What are the challenges in implementing change management processes?
According to authorlist Change management efforts are absolutely essential for the surviving and thriving of the organization but they are also extremely difficult to implement. Some of the biggest obstacles in implementing change efforts are –
- Change efforts are often made by new leaders because they are chosen by board to do so. These leaders often have less trust among the workforce compare to the people with whom they were already working with over the years.
- Change efforts are often targeted at making fundamental aspects in the business – operations and culture. Change management disrupts are status quo thus face opposition from both within and outside the organization.
- Change efforts create an environment of uncertainty in the organization that impacts not only the productivity in the organization but also the level of trust in the organization.
- Change management is often a lengthy, time consuming, and resource consuming process. Managements try to avoid them because they reflect negatively on the short term financial balance sheet of the organization.
- Change management efforts are made when the organization is in dire need and have fewer resources. This creates silos protection mentality within the organization.
How you can apply Change Management Principles to Estonia Air's Big Buy case study?
Leaders can implement Change Management efforts in the organization by following the “Eight Steps Method of Change Management” by John P. Kotter.
Step 1 - Establish a sense of urgency
What are areas that require urgent change management efforts in the “ Estonia Air's Big Buy “ case study. Some of the areas that require urgent changes are – organizing sales force to meet competitive realities, building new organizational structure to enter new markets or explore new opportunities. The leader needs to convince the managers that the status quo is far more dangerous than the change efforts.
Step 2 - Form a powerful guiding coalition
As mentioned earlier in the paper, most change efforts are undertaken by new management which has far less trust in the bank compare to the people with whom the organization staff has worked for long period of time. New leaders need to tap in the talent of the existing managers and integrate them in the change management efforts. This will for a powerful guiding coalition that not only understands the urgency of the situation but also has the trust of the employees in the organization. If the team able to explain at the grass roots level what went wrong, why organization need change, and what will be the outcomes of the change efforts then there will be a far more positive sentiment about change efforts among the rank and file.
Step 3 - Create a vision
The most critical role of the leader who is leading the change efforts is – creating and communicating a vision that can have a broader buy-in among employees throughout the organization. The vision should not only talk about broader objectives but also about how every little change can add up to the improvement in the overall organization.
Step 4 - Communicating the vision
Leaders need to use every vehicle to communicate the desired outcomes of the change efforts and how each employee impacted by it can contribute to achieve the desired change. Secondly the communication efforts need to answer a simple question for employees – “What it is in for the them”. If the vision doesn’t provide answer to this question then the change efforts are bound to fail because it won’t have buy-in from the required stakeholders of the organization.
Step 5 -Empower other to act on the vision
Once the vision is set and communicated, change management leadership should empower people at every level to take decisions regarding the change efforts. The empowerment should follow two key principles – it shouldn’t be too structured that it takes away improvisation capabilities of the managers who are working on the fronts. Secondly it shouldn’t be too loosely defined that people at the execution level can take it away from the desired vision and objectives.
Step 6 - Plan for and create short term wins
Initially the change efforts will bring more disruption then positive change because it is transforming the status quo. For example new training to increase productivity initially will lead to decrease in level of current productivity because workers are learning new skills and way of doing things. It can demotivate the employees regarding change efforts. To overcome such scenarios the change management leadership should focus on short term wins within the long term transformation. They should carefully craft short term goals, reward employees for achieving short term wins, and provide a comprehensive understanding of how these short term wins fit into the overall vision and objectives of the change management efforts.
Step 7 - Consolidate improvements and produce more change
Short term wins lead to renewed enthusiasm among the employees to implement change efforts. Management should go ahead to put a framework where the improvements made so far are consolidated and more change efforts can be built on the top of the present change efforts.
Step 8 - Institutionalize new approaches
Once the improvements are consolidated, leadership needs to take steps to institutionalize the processes and changes that are made. It needs to stress how the change efforts have delivered success in the desired manner. It should highlight the connection between corporate success and new behaviour. Finally organization management needs to create organizational structure, leadership, and performance plans consistent with the new approach.
Is change management a process or event?
What many leaders and managers at the Estonian Air's fails to recognize is that – Change Management is a deliberate and detail oriented process rather than an event where the management declares that the changes it needs to make in the organization to thrive. Change management not only impact the operational processes of the organization but also the cultural and integral values of the organization.
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