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NN12 Business Management

Published : 22-Oct,2021  |  Views : 10

Question:

a) Examine and discuss the key issues of corporate responsibility relating to your chosen sector. Weighting 
b) Analyse and explain what you consider to be 'best practice' within the sector, making reference to ethical theory. 
c) Make recommendations for businesses in the sector to show they are being more responsible. Weighting 

Answer:

Introduction:

Since the beginning of the journey in the mid-1990s, the budget airlines of Europe have registered comprehensive growth in the target market becoming the third leading participant in the aviation industry in the target region (Dennis, 2015). In the recent time, the emergent of holidaymakers such as Tallinn and Sharm el-Sheikh have created significant market challenges for low-carrier airlines. Alternatively, the leading national based airlines corporations such as Lufthansa and British Airways have posed substantial challenges for low-fare airlines by offering unmatched services and cheaper fares on more short-haul transmit (Fan, 2013). Currently, the growth of low-cost carrier market has slowed down in the European market according to the reports of Aviation Economics.

The all new outfits of the budget airlines in European Aviation industry have significantly supported the profitability and growth of the all the participants. By offering efficient services at an affordable pricing, the low-cost airlines in Europe have operated on a single route. Furthermore, the low-maintenance cost of carriers has played an instrumental role securing profits. Currently, the low-fare budget airlines industry in Europe has got major participants such as Ryanair, Easy Jet, Air Berlin, Norwegian, Vueling Airlines, and Wizz Air, etc (The Economist, 2011). The expansion chances for Ryanair, Easy Jet, and other low-budget airlines in Europe have been described in Appendix 1. The study has identified the key issues of Corporate Responsibility relating to budget airlines industry in Europe. Furthermore, the best practices considered in the sector have been described in the study paper as well. To finish, recommendations for businesses operating in the budget airlines industry in Europe have been elaborated in the study so that the corporations can become more socially responsible. In terms of worldwide growth of low-cost airlines, Appendix 2 has been added to describe the scenario.

The key issues of Corporate Responsibility

The competitive business environment of the European budget airlines has followed significant corporate social responsibility in their operating markets leading towards growth and sustainability (Pierson and Sterman, 2013). Currently, in order to increase the values of the organisations, socially responsibility activities can be termed as the source to competitive edge over other market participants. According to Carroll’s pyramid of CSR, a corporate citizen has four different responsibilities such as Philanthropic Responsibilities, Ethical Responsibilities, Legal Responsibilities and Economic Responsibilities (Kucukusta, Denizci Guillet and Chan, 2016). Please refer to Appendix 3 for better understanding. Hence, it is important for a budget airline organisation to meet all these responsibilities to effectively participate in the welfare of the society, environment and economy. Meanwhile, CRS has become one of the most critical strategies of the low-fare airlines to influence customer loyalty and brand recognition (Fan, 2013). Decisively, there are key issues related to CRS in the budget airlines industry as discussed in the underlying section.

Corporate Governance

The corporate governance of the European budget airlines can be identified as one of the leading issues defining corporate and social responsibilities. Based on the broader structure of the company, the management needs to focus on the responsibilities and commitments towards the target demographics (Ryerson and Kim, 2013). For instance, Ryanair’s management has to develop the structure of corporate governance as the organisation is facing continuous allegations. Moreover, the corporate governance policies of the low-fare carriers need to be determined based on the regulatory directives (Lerrthaitrakul and Panjakajornsak, 2014). Decisively, the CSR issues are governed by International Air Transport Association (IATA), International Civil Aviation Organisation (ICAO), and Global Reporting Initiative (GRI) on the basis of many situations. Significantly, conflict of interest among the executives has created issues in maintaining social responsibilities in the business environment. The low-fare airlines industry-specific CSR have been detained by international standards so that corporate governance policies can deliver transparency in business (Ghertman and Guedri, 2012). Hence, lack of commitment towards the employees and target demographics has caused substantial issues in CSR for budget airlines operating in the European aviation industry. For example, Air Berlin, Norwegian, and Vueling Airlines have faced CSR related challenges and court cases that signify the essence of restructuring the corporate governance to avoid illegal activities (Lerrthaitrakul and Panjakajornsak, 2014).

Codes of Conduct

The low-fare airline's industry in Europe has continuously faced CSR challenges based on codes of conduct, legal compliance, and corruption issues in the business management. The GRI and ICAO have focused on the leading CSR issues that have created an adverse impact on the society. Precisely, the companies have faced significant challenges to maintain the codes of conduct and legal compliance that have led to legal issues and court cases. Under the current circumstances, leading low-fare airlines such as Air Berlin, Norwegian, and Easy Jet have faced allegations of corruption. Some of the suppliers have filed court cases against the airlines complaining about their way of business.  In order to improve the infrastructure of the aviation industry, the companies have followed unethical ways such as bribery and corruption.  For instance, the management of Air Berlin has been accused by the suppliers in charge of taking bribes (Kucukusta, Denizci Guillet and Chan, 2016). Meanwhile, such social issues have hampered the business relationships with the stakeholders. Moreover, recently, many of the stakeholders, employees and target audience have filed legal cases against the aviation companies alleging breaching the code of conduct (Saloner, Shepard and Podolny, 2011).

Risk and Crisis Management

The modern hierarchy of CSR issues regarding the budget airlines of Europe has included risk and crisis management as one of the criteria leading to CSR challenges. Most of the small aviation corporations are avoiding the risk analysis associated with the business environment. By failing to develop risk response strategies and crisis preparedness, the companies are losing their value in front of the stakeholders (Mark Wever, 2016). As a result of the consequences, the growth of the industry has slowed down. Notably, Ryanair and other low-fare budget airlines have found it difficult to control the safety policies as expenses are mounting day by day. In the corporate social responsibility of the low-fare aviation corporations operating in the Europe market, risk correlation to the business is found to be missing. Therefore, IATA has questioned about the risk mitigation policies adopted by most of the organisations attached to the industry (Ghertman and Guedri, 2012).

Customer Relationship Management

By identifying the CSR-related issues in the European budget airlines industry, the negative impact and the challenges associated with the strategic activities have been defining in a conclusive way. Leading companies in the low-fare airline industry in the Europe such as Ryanair, Easy Jet, Air Berlin, Norwegian, and Vueling Airlines, have faced substantial challenges to meet the expectation of the target audience. For instance, customers have lodged several complaints against leading airlines services for mismanagement and harassment (Ryerson and Kim, 2013). Meanwhile, customer relationship management can be recognised as one of the leading challenges in the CSR of the firms associated with low-fare airlines industry in the European region. The customer feedback process has lacked the standards (Sadler, 2014). As a result of the consequences, customer satisfaction measurement has hampered on a competitive basis (Baden, Harwood and Woodward, 2009). Decisively, such potential issues in the CSR have created a negative impact on the overall image of the industry in front of the target demographics (Moharana, 2010).

Fleet Management

Fleet management is another essential aspect in the corporate social responsibility. The fleet management identifies the fleet age so that the safety measures have been set for the target audience. Moreover, the fleet management reasonably removes or reduces the risk factors leading to increasing efficiency and services. However, due to low-fares and low-maintenance cost, the industry has not followed the instructions in the fleet management creating issues (Papatheodorou, 2014). Furthermore, the fleet management contributes towards the measures that can be adopted to improve the fuel efficiency without causing any adverse effect on the environment. Based on the concept of business, leading companies in the market such as Easy Jet, Air Berlin, and Vueling Airlines have practices effective fleet management techniques to cut down the expenses of services.  Currently, fleet management based challenges have become one of the most important issues in CRS for the businesses operating in the budget airlines industry in Europe leading to environmental problems and dissatisfaction of stakeholders (Szczanowicz and Saniuk, 2016).

Environmental Policy

The environmental policies enforced on the airline's industry have caused substantial issues in CSR of the participating companies. Precisely, there are certain corporate requirements, legal guidelines, and environmental management system regulations developed for the companies operating in the aviation industry (Marano and Kostova, 2015). Meanwhile, by developing bio-fuel technology and noise management approach according to the guidelines, the organisations can improve their images and CSR. Admittedly, the budget airlines have followed low-maintenance cost strategy so that a healthy profit can be secured from the business (Rotha?rmel, 2017). For instance, Ryanair, Easy Jet, and Air Berlin have promoted specific policies to control the emission of carbon dioxide.  Hence, following all the environmental policies can be difficult, to say the least. As a result, environmental policy has become challenges to corporate social responsibility. 

Climate Change

Climate change issues can be defined as one of the key challenges involved in the CSR of the aviation sector. In order to reduce the increasing factors of global warming, the authorities attached to the airline industry must develop suitable practices so that direct as well as indirect emissions of Green House Gases (GHG) i.e. Carbon dioxide, methane, and hydrocarbons, etc. can be controlled. Therefore, the organisations participating in the airline's industry such as Ryanair, Easy Jet, Air Berlin, Norwegian, and Vueling Airlines need to identify their social and environmental responsibilities as well (Marano and Kostova, 2015). Furthermore, massive consumption of energy has been another leading challenge for the businesses in the aviation sector (Papatheodorou, 2014). Hence, the budget airlines in the European market have opted for significant technology to reduce the adverse effect on climate change. By recognising the long-term effect of climate change and global warming, the budget airlines companies must adopt latest bio-fuel technologies to reduce the emission of GHG.

Labour Practice and Human Rights

In the contemporary management of the budget airlines, a number of issues can be related to CSR based on unethical labour practices and violation of human rights of stakeholders. In order to maximise the profitability of the business, most of the companies have failed to meet the guidelines and regulations in labour practices (Schreck, 2009). In most of the cases, the employees attached to the low-fare airlines have complained about unethical hiring and firing of employees. For instance, allegation and discriminatory charges have been made against companies such as Easy Jet, Air Berlin, and Vueling Airlines. Alternatively, discrimination in recruitment and selection based on religion, disability, age, gender, and social status can be found in the entire system of the aviation industry (Lerrthaitrakul and Panjakajornsak, 2014). Such violation of equal employment rights and human rights has become a major problem in CSR for the leading low-carriers operating in the European territory.

The Best Practice with the sector

In the low budget airlines industry, leading companies in Europe such as Air Berlin, Ryanair and Easy Jet have been identified as the best practitioners. Precisely, the companies have tried to match the practices of British Airlines although the resources available to the firm are limited. In order to identify the best practice model for corporate responsibility in the low budget airline industry, Air Berlin, Ryanair and Easy Jet have promoted CSR strategy at the highest level. Currently, the airline industry is at its peak due to the falling price of oil and other supporting factors such as growing economy and reducing political barriers. Hence, companies such as Air Berlin and Easy Jet have increased the number of hiring to make a significant impact in employment scenario (Pate and Beaumont, 2016). 

CSR model as competitive advantage

Study shows that CSR can be used as a strategy in four different degrees. Firstly, CSR as a reactive strategy was used in the past to gain trust and confidence of the stakeholders. But, the huge cost of the strategy has led to the invention of alternative strategies that are currently used by the budget airline organisations in Europe (McGee, 2014). The second strategy is to use CSR as an image building exercise, which may lead to failure of discharging the social responsibilities due to no alignment between the business goals and CSR. Thirdly, CSR is used for improving the operational efficiency by implementing innovative ideas to increase productivity and improve environmental impacts (Mark Wever, 2016). Fourthly, CSR as a competitive advantage can be used to seek sustainable growth of business in the long run. Hence, it is important for the budget airline companies to consider CSR as a competitive advantage to develop its operational efficiencies by supporting the environmental, social and economic causes. A diagram has been presented in Appendix 4 for better understanding.

Best CSR strategy in Budget Airline Business

Air Berlin, Ryanair and Easy Jet have developed a road map to successfully implement the CSR activities into action. CSR strategy planning helps the budget airlines to use its limited resources with the unique environment to meet the stakeholders’ expectations and needs of the market. Increased involvement of the stakeholders has lead to concrete questions regarding the company’s policies towards the environmental issues (Lerrthaitrakul and Panjakajornsak, 2014). Hence, companies such as Air Berlin, Ryanair and Easy Jet have ensured CSR strategy to incorporate social responsibilities into actions with a better ability to adapt to the changing market factors. The best practice CSR models used by major budget airline companies in Europe are discussed herein below:

Ryanair

CSR strategy has effectively become a part of the marketing strategy to improve the attracting power of the brand. For example, the budget airline like Ryanair is focusing on digital advertisement to save time and money of the stakeholders (Boyd, 2014). On the other hand, CSR leads to brand recognition that further influences the customers’ perception of using the services of budget airlines. Moreover, Ryanair aims to reduce the carbon emission by around 1 to 2 percent annually (May, Cheney and Roper, 2016). Furthermore, the airline organisation also implements CSR policies for better management of solid waste through recycling. The most of the budget airline organisations in Europe support the community by providing better jobs and safe transportation services to the people (Pate and Beaumont, 2016). Similarly, Ryanair has raised funds for the social causes by conducting charity events.

Air Berlin

New strategies have been implemented by Air Berlin to develop customer services such as e-ticketing, pick-up and drop facilities, online check-in to provide a better experience to the consumers that can be identified as most convenient business practices. Relatively, innovative technology has been implemented by Air Berlin in the form of fingerprint scanner to check the identity of the customers to save their time (Lerrthaitrakul and Panjakajornsak, 2014). Also the company has used CSR as a part of workplace strategy is used to maintain a culturally diversified workforce. However, the budget airline company operates in different nations and employs people belonging to different culture and ethical background (May, Cheney and Roper, 2016). Hence, the identified CSR policy of Air Berlin is an important concept that has been implemented while planning the HR and workplace policies to maintain corporate culture in the organisation. Evidently, the identified CSR policy helps to mitigate the issues of workplace conflicts through better HR management strategies (Pate and Beaumont, 2016)

Easy Jet

The customers have options to choose between the services of different budget airline companies. Hence, Easy Jet has offered lower price to attract the customers. On the other hand, the airline company also focuses on continuous monitoring, evaluation and development of the customers’ services to enhance their market positioning (May, Cheney and Roper, 2016). In addition, the airline company has offered services to the customers that make them feel less time consuming and comfortable. Currently, all major airline companies in Europe have implemented CSR polices to reduce carbon emission by using fuel saving technology (Gond and Moon, 2012). For example, Easy Jet has used recyclable products that have been utilised in serving the customers to reduce solid waste emission (Pate and Beaumont, 2016). Hence, such initiative has been taken by the Easy Jet Airline to reduce pollution and safeguard the environment.

Recommendations

By considering the above analysis, the budget airline companies in Europe must implement the best CSR practice models to improve their market positioning and safeguard the environment, society and economy. The following recommendations are suggested to the Budget Airline companies of Europe such as Ryanair, Easy Jet, Air Berlin, Norwegian, Vueling Airlines, and Wizz Air to implement better CSR strategies:

  • CSR as competitive strategy:The budget airline organisations must implement CSR as a competitive strategy in order to survive in the current business environment. First of all, the companies must align their CSR goals with the business strategies to maintain environmental, social and economic welfare along with a higher profitability (Ghertman and Guedri, 2012). Hence, CSR as a competitive strategy will help to improve the current operations of the firms such as Ryanair, Air Berlin and Easy Jet to enhance its productivity and seek sustainable growth of business.
  • Implement innovative technology:The budget airline companies in Europe must implement innovative technology to minimise the emission of greenhouse gases and noise occurring due to the operations of the firms. For example, fuel efficient technology and bio-fuels that has been used by companies like British Airways and Air France can be adopted by the budget airline companies to minimise greenhouse gas emission (Gond and Moon, 2012). On the other hand, noise cancellation systems can be installed to minimise noise pollution. Furthermore, the firms can introduce finger print scanners used by Air France to improve the speed of the identity verification system during the boarding process to improve customer services.
  • Consider regulatory framework:For the budget airline organisations in Europe, it is important to consider the regulatory frameworks of the government of the nations in which the firms operate. Consideration of the rules and regulations will help the firms stay up to date in terms of CSR strategies. Furthermore, by following the rules and regulations, the companies like Ryanair, Air Berlin and Easy Jet can stay safe from legal obligations and loss of money and reputation (Campbell et al., 2009)..

Conclusion:

By considering the described issues of CSR and best practice models in the budget airline industry of Europe, the employers must implement CSR as a competitive strategy by aligning the social objectives with the business strategy of the firm. CSR not only means to work for the betterment of the environment, society, and economy, but also tends to earn a better profitability for the stakeholders. Conclusively, by implementing the best practice models in the market, the budget airlines can improve their corporate social responsibilities and maintain the grow rate in the market.

References:

Baden, D., Harwood, I. and Woodward, D. (2009). The effect of buyer pressure on suppliers in SMEs to demonstrate CSR practices: An added incentive or counter-productive?. European Management Journal, 27(6), pp.429-441.

Boyd, J. (2014). Intra-industry structure and performance: strategic groups and strategic blocks in the worldwide airline industry. European Management Review, 1(2), pp.132-144.

Campbell, T., Cragg, W., Schwartz, M. and Weitzner, D. (2009). Corporate social responsibility. 1st ed. Farnham [u.a.]: Ashgate.

Dennis, N. (2015). Industry consolidation and future airline network structures in Europe. Journal of Air Transport Management, 11(3), pp.175-183.

Fan, T. (2013). “Way Smarter”: Valuair in the budget airline industry. Emerald Emerging Markets Case Studies, 3(4), pp.1-24.

Ghertman, M. and Guedri, Z. (2012). Rivalry and Forbearance in the European Airline Industry: Evidence of an Inverted U-Shaped Competitive Pattern. Management international, 16(4), p.23.

Gond, J. and Moon, J. (2012). Corporate social responsibility. 1st ed. London [u.a.]: Routledge.

Kucukusta, D., Denizci Guillet, B. and Chan, H. (2016). The Effect of CSR Practices on Employee Affective Commitment in the Airline Industry. Journal of China Tourism Research, 12(3-4), pp.451-469.

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Marano, V. and Kostova, T. (2015). Unpacking the Institutional Complexity in Adoption of CSR Practices in Multinational Enterprises. Journal of Management Studies, 53(1), pp.28-54.

Mark Wever, (2016). The Importance of Customer Loyalty Programs for the European Airline Industry. Journal of US-China Public Administration, 13(1).

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Papatheodorou, A. (2014). Deregulation and liberalisation of the airline industry: Asia, Europe, North America and Oceania. Tourism Management, 25(1), p.140.

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Ryerson, M. and Kim, H. (2013). Integrating airline operational practices into passenger airline hub definition. Journal of Transport Geography, 31, pp.84-93.

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Saloner, G., Shepard, A. and Podolny, J. (2011). Strategic management.. 1st ed. New Delhi: Wiley India.

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