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Harvard Case - Malaysia Airlines: Culture Transformation While Flying Through Turbulence

"Malaysia Airlines: Culture Transformation While Flying Through Turbulence" Harvard business case study is written by Fermin Diez, Michael Bashshur, Sin Mei Cheah. It deals with the challenges in the field of Strategy. The case study is 16 page(s) long and it was first published on : Jun 11, 2023

At Fern Fort University, we recommend that Malaysia Airlines (MAS) embark on a comprehensive and multi-faceted transformation strategy focused on rebuilding its brand, enhancing operational efficiency, and fostering a culture of innovation and customer-centricity. This strategy will leverage a combination of digital transformation, strategic alliances, product differentiation, and organizational culture change, ultimately aiming to achieve sustainable competitive advantage in the highly competitive global aviation industry.

2. Background

Malaysia Airlines, once a symbol of national pride, faced significant challenges in the late 2000s and early 2010s. These challenges included declining profitability, intense competition, and a series of tragic events, including the disappearance of MH370 and the downing of MH17. The airline's organizational culture was characterized by a rigid hierarchy, lack of innovation, and a reactive approach to change.

The case study focuses on the efforts of Christoph Mueller, the CEO appointed in 2015, to revitalize MAS. Mueller implemented a series of initiatives aimed at transforming the airline's culture, operations, and brand image. These initiatives included restructuring the organization, streamlining operations, introducing new technologies, and emphasizing customer service.

3. Analysis of the Case Study

To analyze the case, we can utilize the following frameworks:

1. Porter's Five Forces:

  • Threat of new entrants: High due to low barriers to entry in the aviation industry.
  • Bargaining power of buyers: Moderate, as customers have a range of airlines to choose from.
  • Bargaining power of suppliers: Moderate, as airlines rely on a limited number of aircraft manufacturers and fuel suppliers.
  • Threat of substitutes: Moderate, as alternative modes of transportation like high-speed rail can compete on certain routes.
  • Rivalry among existing competitors: High, with intense competition from established airlines and low-cost carriers.

2. SWOT Analysis:

  • Strengths: Strong brand recognition, extensive network, experienced workforce.
  • Weaknesses: Damaged reputation, outdated technology, inefficient operations, high cost structure.
  • Opportunities: Growing demand for air travel in Asia, potential for partnerships and alliances, technological advancements in aviation.
  • Threats: Economic downturn, fuel price volatility, intense competition, geopolitical risks.

3. Value Chain Analysis:

MAS's value chain can be analyzed to identify areas for improvement:

  • Inbound logistics: Streamlining procurement processes, optimizing inventory management.
  • Operations: Modernizing fleet, improving maintenance procedures, enhancing operational efficiency.
  • Outbound logistics: Optimizing baggage handling, improving ground handling services.
  • Marketing and sales: Rebuilding brand image, leveraging digital marketing, enhancing customer experience.
  • Service: Providing personalized and efficient customer service, offering value-added services.

4. Business Model Innovation:

MAS can explore innovative business models to enhance profitability and customer satisfaction:

  • Hybrid business model: Combining full-service and low-cost offerings to cater to different customer segments.
  • Subscription-based model: Offering loyalty programs and subscription services to attract frequent flyers.
  • Value-added services: Expanding into ancillary services like travel insurance, airport lounges, and in-flight entertainment.

4. Recommendations

MAS should implement the following recommendations to achieve a sustainable turnaround:

1. Culture Transformation:

  • Leadership Development: Invest in leadership training programs to foster a culture of accountability, innovation, and customer-centricity.
  • Empowerment and Collaboration: Encourage employee participation and decision-making, creating a more collaborative and innovative work environment.
  • Values-Driven Culture: Reinforce a strong set of core values that emphasize safety, service excellence, and integrity.

2. Digital Transformation:

  • Technology Investment: Invest in modern technology systems, including advanced analytics, AI, and machine learning, to optimize operations and enhance customer experience.
  • Digital Marketing: Leverage digital channels like social media, search engine optimization, and online advertising to reach target audiences and build brand awareness.
  • Personalized Customer Experience: Utilize data analytics to personalize customer interactions, offer tailored services, and enhance customer satisfaction.

3. Strategic Alliances:

  • Strategic Partnerships: Explore partnerships with airlines, travel agencies, and other businesses to expand reach, share resources, and offer more comprehensive travel solutions.
  • Code-sharing Agreements: Collaborate with other airlines to offer seamless connections and expand route networks.
  • Joint Ventures: Consider joint ventures with other airlines to enter new markets and leverage complementary strengths.

4. Product Differentiation:

  • Premium Services: Offer premium services and amenities to attract high-value customers, including enhanced comfort, personalized experiences, and exclusive benefits.
  • Value-Added Services: Provide a range of value-added services, such as airport lounge access, baggage delivery, and in-flight entertainment options, to enhance customer satisfaction.
  • Focus on Destination: Develop unique travel packages and experiences that highlight the destination, catering to specific interests and preferences.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  • Core Competencies: The recommendations align with MAS's core competencies in operations, customer service, and brand recognition.
  • External Customers: The recommendations focus on enhancing customer experience, offering personalized services, and building brand loyalty.
  • Competitors: The recommendations aim to differentiate MAS from competitors by leveraging digital technology, strategic alliances, and unique product offerings.
  • Attractiveness: The recommendations are expected to improve profitability, enhance revenue growth, and strengthen MAS's competitive position.

6. Conclusion

By implementing these recommendations, MAS can achieve a sustainable turnaround, rebuild its brand image, and become a leading player in the global aviation industry. The transformation strategy should be implemented in a phased manner, with clear milestones and metrics to track progress.

7. Discussion

Alternative strategies include focusing solely on cost leadership, pursuing a complete merger with another airline, or divesting non-core assets. However, these options may not be as effective in addressing MAS's core challenges and achieving long-term success.

The recommendations are based on the assumption that MAS can successfully implement the necessary changes, secure funding for investments, and overcome potential challenges such as regulatory hurdles and economic uncertainty.

8. Next Steps

  • Phase 1: (Year 1) Focus on culture change, leadership development, and technology upgrades.
  • Phase 2: (Year 2) Implement strategic alliances, expand product offerings, and enhance customer experience.
  • Phase 3: (Year 3) Evaluate progress, refine strategies, and pursue further growth opportunities.

The success of MAS's transformation will depend on effective leadership, strong commitment to change, and a collaborative approach involving all stakeholders. By embracing innovation, adapting to evolving customer needs, and leveraging its strengths, MAS can reclaim its position as a leading airline in the global market.

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Case Description

This case study follows Malaysia Airlines Berhad (MAB) through its Culture Journey (2018-2021), an initiative to rebuild the corporate culture as part of a broader turnaround strategy. The airline was stricken by twin tragedies in 2014 - the disappearance of Flight MH370 over the Indian Ocean and the downing of Flight MH17 in Ukraine. Such devastation would have bankrupted any airline, and MAB was particularly vulnerable as it has been battling financial difficulties for years. Having undergone numerous restructurings, nationalisation, and leadership turnovers, the airline's decision to embark on a culture transformation was unlike that of previous restructuring plans. Unique to the approach were the unconventional ideas of Dato' Mohd Khalis Abdul Rahim, Group Chief Human Capital Officer, including engaging a religious teacher to boost employee morale, singing the national anthem at company events, and the composition of a corporate song. These efforts to reset the corporate culture were reinforced by a series of neuro-linguistic programming workshops, as well as upskilling and reskilling programmes. While the Culture Journey started to bear fruit, MAB was hit by the strong headwinds of COVID-19 and the eruption of the Ukraine-Russia war. The silver lining was the reopening of Malaysia's international borders in 2022, followed by the rebound of the travel industry and surging passenger traffic volumes. By early 2023, MAB was in its strongest financial position in years. The airline also won a national HR award for the success of its human capital development effort, an integral part of the Culture Journey. However, the road ahead to rebuilding its reputation, repositioning it as a premium airline, and recapturing market share in a highly competitive industry was still long and arduous. The question remained: could the airline sustain its revitalised culture in the post-pandemic world?

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