Analysis of Airline Mergers and Strategic Alliances

The rising rate of globalization and the need to maintain competitiveness has prompted many airline companies to implement unique strategies. In most parts of the globe, these institutions are forming mergers and other strategic alliances to help them in improving their control in different markets (Daniels, Radebaugh & Sullivan, 2018). The most significant partnerships developed over the years include one world, star and sky team that comprise several airlines that travel to various destinations. The move to join these business models have distinct effects of these companies

Mergers and Acquisitions

Mergers entail total purchasing of a target institution by another larger company, and thus one of them seizes to exist. An acquisition, on the other hand, involves buying a portion of another firm. Notably, the use of these business models in the airline industry have different benefits to the firms including enhancing synergy, cost-effectiveness, increasing the level of competition, and also helps in creating new markets (Daniels, Radebaugh & Sullivan, 2018). However, it also has several disadvantages like loss of skilled workers, increases overall expenses incurred and also raises the level of uncertainty.

Non-Equity Alliances

 Non-equity alliances are strategic alliances formed by two or more institutions to bring together their capabilities and resources to help in increasing their operations. This business model has different benefits to companies including reducing overall expenses, promotes sharing of resources including skilled labor, increased competitiveness in the industry, and enhances easy decision making in developing unique strategies (Wilson, 2014). However, it also has some disadvantages such as increasing confusion in performing certain tasks, longer decision-making processes, increased responsibilities, and exposing a firm to its competitors. Considerably, this framework allows enterprises to maintain their culture thus promoting a comfortable working environment for its staff. Airline companies using this method such as one world alliance have been able to increase their productivity through the use of joint ventures drastically.

References

Daniels, J. D., Radebaugh, L. H., & Sullivan, D. P. (2018). International business: Environments and operations. 16th Edition. Pearson.

Wilson, J. (2014). The Pros and Cons of Nonequity Partnerships. Journal of Accountancy, 217(3).  Retrieved from:https://www.aicpastore.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2013/CPA/Jan/NonEquity.jsp