Discuss the nature and strategic relevance of the Air France-KLM merger. Should Air France-KLM create new partnerships or acquisitions?
AIR FRANCE – KLM: RULING THE SKIES
Discuss the nature and strategic relevance of the Air France-KLM merger.
Should Air France-KLM create new partnerships or acquisitions?
On 5 May 2004, despite great opposition of industry experts the French airline Société Air France (Air France) and the Dutch Koninklijke Luchtvaart Maatschappij N.V. (KLM) created the world’s largest airline group by turnover named Air France-KLM. The merger represented the first consolidation of two national flag carriers in the aviation history, where alliances were a traditional way of co-operating. This essay will concentrate on discussing the nature and strategic relevance of Air France-KLM merger by analysing the relevant relational actors in their industry context. Thereafter it will briefly discuss the core competencies of the two organisations and examine the opportunities and threats that resulted from these due to the merger. Finally it will concisely discuss if Air France-KLM should create new partnerships or acquisitions.
In order to get a better understanding of the nature of Air France-KLM merger it is beneficial to analyse the strategic impact of relevant relational actors in their industry context. Porter (1980) and Reve (1990) as citied in De Wit and Meyer (2010: 366 -368) identify the four main categories of relationships between the firm and other industry parties as follows: Upstream vertical (supplier) relations, downstream vertical (buyer) relations, direct horizontal (industry insider) relations and indirect horizontal (industry outsider) relations. Based on this framework the key relevant relational actors for Air France-KLM could be categorised as follows: airline manufacturers in the suppliers’ category; leisure and business passengers, cargo services customers and other airlines using the MRO services in buyers’ category; airlines in the Skyteam alliance and direct competitors in the industry insiders’ category; and providers of alternative means of transport
Discuss the nature and strategic relevance of the Air France-KLM merger.
Should Air France-KLM create new partnerships or acquisitions?
On 5 May 2004, despite great opposition of industry experts the French airline Société Air France (Air France) and the Dutch Koninklijke Luchtvaart Maatschappij N.V. (KLM) created the world’s largest airline group by turnover named Air France-KLM. The merger represented the first consolidation of two national flag carriers in the aviation history, where alliances were a traditional way of co-operating. This essay will concentrate on discussing the nature and strategic relevance of Air France-KLM merger by analysing the relevant relational actors in their industry context. Thereafter it will briefly discuss the core competencies of the two organisations and examine the opportunities and threats that resulted from these due to the merger. Finally it will concisely discuss if Air France-KLM should create new partnerships or acquisitions.
In order to get a better understanding of the nature of Air France-KLM merger it is beneficial to analyse the strategic impact of relevant relational actors in their industry context. Porter (1980) and Reve (1990) as citied in De Wit and Meyer (2010: 366 -368) identify the four main categories of relationships between the firm and other industry parties as follows: Upstream vertical (supplier) relations, downstream vertical (buyer) relations, direct horizontal (industry insider) relations and indirect horizontal (industry outsider) relations. Based on this framework the key relevant relational actors for Air France-KLM could be categorised as follows: airline manufacturers in the suppliers’ category; leisure and business passengers, cargo services customers and other airlines using the MRO services in buyers’ category; airlines in the Skyteam alliance and direct competitors in the industry insiders’ category; and providers of alternative means of transport
References: Som, A., (2009) Air France-KLM: Changing the rules of the game. In: De Wit, B. and Meyer, R. (2010) Strategy: Process, Content, Context: An International Perspective, 4th Revised edition, Cengage Learning EMEA text. pp. 823 – 836 Johnson, G., Scholes, K. and Whittington, R. (2008) Exploring Corporate Strategy, 8th edition, Pearson Education, pp. 366 De Wit, B. and Meyer, R. (2010) Strategy: Process, Content, Context: An International Perspective, 4th Revised edition, Cengage Learning EMEA text. pp. 336 -338 Hamel, G., Doz, Y. and Prahalad, C. (1989) ‘Collaborate with Your Competitors - and Win’, The Harvard Business Review, vol.1, January-February, pp. 133-139