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It takes unique skills and managerial prowess to keep a company running even in times of global economy distress. It should have the ability to achieve its goals and missions despite the challenges likely to be faced in the competitive industry (Brooks 2006). Most companies fail to withstand the pressure of financial crisis that is experienced globally.
This year has seen the worst global financial crisis hit most industries in the world and Australia has not been spared. Most industries have suffered due to the financial crisis with most of them recording a huge decline in their net profits. However, it is important to note that despite the huge decline in most of the companies, others have continued to survive the crisis (Davidson 2007).
One such outstanding company is the Flight Centre Company which continues to prosper in the competitive market. Flight Centre has been termed as the leading travel agent and although its management has been widely criticized, it has stuck to a particular management strategy that has led it to its success (Davidson and Griffin 2006). This paper is aimed at discussing the factors attributed to the success of Flight Centre.
History Of Flight Centre
To understand the success behind Flight Centre better, it is important to look at how it was formed, its management and challenges (Johnson 2005). Flight Centre traces its origin way back in 1981. The owner, Graham Turner operated a UK bus company in partnership with Bill James called Topdeck. When they decided to part ways, Turner retained 18% ownership to form Flight Centre.
Beside the United Kingdom, the company opened branches in other parts of the world such as the United States and New Zealand. However, the company was greatly affected in 1991 as a result of the Gulf War leading to the closure of the UK and US offices. Nevertheless, the company picked up by 1995 and opened more offices in South Africa and Canada. The UK and U.S offices resumed their operations later on in the same period.
Economists claim that Flight Centre has changed the air-travel industry in Australia by revolutionising it (Singh 2008). This has been attributed to their capability of driving their profitability by volume as opposed to margins.
The company has expanded to cater for different travel needs of its clientele. It has set up various brands to deal with the expanding travel industry. Some of these brands include a student flight, corporate traveller for the clients in the corporate industries, campus travel and holidays, company travel which organises holidays for people in businesses and many other brands.
It is however important to note that despite its history of success, Flight Centre, just like any other company has had its shares of problems.
The year 2005 saw its worst decline in performance by recording the lowest annual profit which had fallen by 7.7% compared to the previous year. This poor performance was attributed to the decision by Graham Turner to relinquish his seat as the Managing Director in 2002 in order to pave way for Shane Flynn, a senior manager in the company then, to succeed him.
The management strategy applied by Shane Flynn was greatly criticized when the company started performing poorly in the Australian Stock Exchange the same year. However, Graham acted fast to remedy the situation before the company collapsed by taking back his position as the Chief Executive Officer of the company hence putting it back to its track.
Current Financial Status of Flight Centre
This year has recorded a great come-back for the company despite the economy recession that is being experienced globally. With an operating income of more than $244.4 million, Flight Centre continues to generate more revenue yearly. The trading period between 2007-2008 recorded a profit of $201 million before tax. The management projects an increase in profit by the end of this year at $240 million before tax based on its current performance (Shaw 2011).
In an interview with one of the leading local newspapers, Mr. Turner expresses his joy at the performance. He reports that the company is enjoying full profits from all its offices in the 10 countries that they operate in for the first time in history. The US office in particular stands out in this exemplary performance by recording a great improvement in its profit margin despite the fierce competition it faces by other leading travel companies in the region.
In Australia, the company becomes one of the few companies that have the opportunity to reap benefits using the stronger Australian dollar during this trading period. However, though the company’s operations have recorded a major growth compared to previous years, its share price has dropped. The share price in May was at $23.50, a figure which has drastically dropped to $22 currently (Shaw 2011).
This year has seen Flight Centre trade between the range of $17.20 to $ 25.13. The current share price implies a drop against the target share price set in the FNArena database. This has not deterred the company from being rated a Buy more than five times as indicated in the FNArena database. The current Flight Centre shares close at $21.40 (Shaw 2011).
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The Success Behind Flight Centre
The question that keeps running in many people’s minds is the reason behind the success of Flight Centre. This can be attributed to its strategic management applied by the Managing Director Mr. Turner to enhance the company’s performance (Phillips 2005). Part of the strategic management applied includes specifying the mission and vision of Flight Centre and ensuring that its objectives have been achieved.
He has further developed some strategic policies that have led to the implementation of certain projects. An example of such a project is setting up two distinct sectors to deal with both the corporate and leisure travel. These sectors have recorded the greatest performance that has acted as a boost to the annual profit at Flight Centre.
Being a transnational company, the management has been wise to employ a structured strategic concept rather than the entrepreneurial concept in their management (Dick and Merrett (2007). The model adopted is suitable due to its wide operational scope, the size of the company and the ability to integrate the stakeholder’s requirements. The success can therefore be attributed to the factors that will be discussed below.
Strategy Formation Of Flight Centre
A successful company should have a document that gives an outline of the activities that a company wishes to achieve (Baum 2006). Flight Centre has an articulated mission statement that clearly states the raison d’être of the company. They approached their strategic formation by conducting an analysis of the company’s situation, target market and the competitor. They then used this assessment to come up with their long term and short term objectives that have helped them achieve their vision.
The strategy formation used by Flight Centre has helped them be ahead of their competitors at all times. It has also helped them to carefully analyse any situation at hand which has led them to penetrate other markets such as Hong Kong and China. This has seen Flight Centre opening up more than 2000 offices in 11 countries and has employed a workforce of over 8000 qualified staff to run their offices. This formation strategy has helped them to be ahead of their competitors in the industry.
The competitor’s move to reduce airline commissions has led to the collapse of many travel agent companies with others recording a poor performance in their profit margin. On the contrary, Flight Centre has managed to curb this competition with their strategic move of adding more shops in different countries and through market segmentation. This strategy has helped the company to position itself for any unforeseeable economic recession (Pratt and Edwards 2008).
Strategy Evaluation Adopted By Flight Centre
This is another factor that can be attributed to the success of Flight Centre. The choice of an effective strategy evaluation is based on all important issues that are deemed to affect the running of a company (Mullins 2005). These issues are then carefully vetted by the management to determine the progressive mode of the company. The competition base should be carefully evaluated to enable the company establish a competitive edge.
Flight Centre is faced by fierce competitors with the main competitor being the airlines themselves who do not associate with any travel agents. An example of such an airline is Qantas who deal with the customers direct rather than through a travel agent. The other competitors are other agents like the Webjet, United Kingdom Trailfinders as well as S8. Despite the tough competition that Flight Centre faces from its competitors, it has come up with a unique differentiating factor that sets it apart from the competitors.
One factor is the wide range of global chains of stores. This has enabled the company to evenly distribute its services to various countries as opposed to its competitors. Secondly, this approach has helped Flight Centre become a brand name that is internationally recognised. This makes it one of the most recognized travel agents in the world especially through its online services.
The mode of action adopted by Mr. Turner to run the company has been greatly evaluated. The director has conducted a thorough analysis that has helped him ascertain major strengths and weaknesses that affect the running of the business. He is known to take precautionary measures especially when the company is being faced with an internal or external factor. When the US office started performing poorly, he changed the entire managerial strategy to get it back on track.
The company mostly relies on its website flightcentre.com as its main marketing tool. The website has been ranked as the most popular travel website globally with thousands of visitors viewing the page on a daily basis. Besides the website, Flight Centre is currently using the social media to advertise its services. This online strategy has enhanced the company’s exemplary performance leading to its success.
Flight Centre projects an increase in the annual profits in the years to come and this will not come as a surprise to many. With a genius mind like Mr. Turner, the company is projected to outsmart its competitors especially due to the new technology that has enabled information to flow even faster. The success behind Flight Centre is purely through hard work and not sheer lack.
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