Running Head: EXTERNAL AND INTERNAL ENVIRONMENTS 1

External and Internal Environments

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Choose the two (2) segments of the general environment that would rank highest in their

influence on the corporation you chose. Assess how these segments affect the corporation

you chose and the industry in which it operates.

The publicly traded corporation that I chose is Delta Airlines, Incorporated. The two

segments of the general environment that would rank highest in their influence on Delta Airlines

is technological and global. In an article written on July 23, 2014, it stated that, “Atlanta-based

Delta has bolstered revenue by charging more for seats with greater legroom, replacing 50-seat

regional jets with larger, more cost-efficient planes.” (Karen Jacobs, 2014) Delta Airlines is based

in Atlanta, GA and flies in the United States as well as five other continents. In order to remain

competitive it must remain up to date on the technology that is needed to retain customers and to

bring in new customers.

Delta is also continuing to remain global by partnering with Kenya Airways to offer flights

between Monrovia, Liberia, and Accra, Ghana. With the many challenges of airplanes crashing

and being shot down in these different countries, it makes remaining global very challenging. The

decision to cease flights in these countries or the safety of its customers is a tough decision to

make. One would assume that the easy decision would be the safety of customers, but ceasing

flights to and from these countries would put a serious financial strain on Delta. Most of the reason

why it has done so well in the past is because of its efforts to remain global and technological.

Delta offers Wi-Fi on its domestic and international flights giving travelers the ability to access

the Internet from any Wi-Fi enabled devices. “On August 5, 2008, Delta announced it would be

installing the Aircell mobile broadband network, Gogo, which enables customers traveling with

Wi-Fi enabled devices, such as laptops, smartphones, and PDAs, to access the Internet for a fee.”
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(Dayton Business Journal, 2010) Technology not only impacts a corporation financially, but as a

whole. The use of technology is needed to keep corporations alive and to start new businesses.

Considering the five (5) forces of competition, choose the two (2) that you estimate are the

most significant for the corporation you chose. Evaluate how well the company has

addressed these two (2) forces in the recent past.

The five forces of competition include the following: suppliers, buyers, competitive rivalry

among current industry firms, product substitutes, and potential entrants to the industry. The two

forces that I believe are the most significant for Delta Airlines is buyers and competitive rivalry

among current industry firms. Buyers, is most definitely the number one factor in the success of

Delta. If customers don’t purchase flights through Delta, it will have to cancel flights, which will

cause it to lose money, and eventually it will have to shut down. It must continue to give the

customers what they want, which means it must listen to its customers to determine what their

needs are. Most customers want to feel like they are a big asset to companies that they invest their

money into. Customers fly Delta because of the relationship it has created with its customers.

There are many other airlines that offer cheaper flights than Delta but somehow it continues to

remain competitive among its rivalries. The question is how does it continue to flourish in such a

competitive environment? In a recent article, Ben Mutzabaugh stated that Delta has added a

second Europe route from Salt Lake City. (Mutzabaugh, 2014) It will also restart its service to

Barbados in December of this year. “During 2013 Delta attempted to strengthen its position in the

fragmented but strategic Los Angeles market through a 12% boost in daily seats year-over-year.”

(CAPA Profiles, 2013) It continues to remain competitive by making sure that its 165 million

annual customers are satisfied by offering of 5,400 flights on a daily basis.

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With the same two (2) forces in mind, predict what the company might do to improve its

ability to address these forces in the near future.

To continue to make its customers happy and remain competitive among its rivalries, Delta

must continue to offer exceptional customer service, offer more flights, and even add flights to

new locations. It must continue to listen to its customers to supply their needs. Its customer service

must reach every location where it has a presence. “Recently, Delta has just finished a $1.4 billion

project to enhance and expand Terminal 4 at JFK, creating a state of the art facility for its

customers.” (Operating Statistics, 2014) Delta will have to strengthen its relationship with its

customers by delivering a higher standard. This can be done by creating a business-level strategy.

The main reason why it must satisfy its customers with its business-level strategy is that returns

earned from relationships with its customers are the lifeblood of the entire corporation. Delta will

have to determine what to offer that will make them stand out or different from other airlines. It

should complete a competitor analysis to predict the extent and nature of its rivalry. Delta also

gives back to its community making it an easier choice when customers must choose an airline.

The nonprofit organizations it participates in are the Conservation Fund, the Breast Cancer

Research Foundation, Habitat for Humanity, and many others. In order to remain competitive,

it can’t lose its focus of why it has been so profitable in the past up until this point. Although, it

is a very profitable corporation and one of the top airlines, it must continue to surpass its

competitors. Delta was named the 2014 Airline of the Year and in order to receive recognition in

this manner, it must create different strategies that will keep them at the top.
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Assess the external threats affecting this corporation and the opportunities available to the

corporation. Give your opinions on how the corporation should deal with the most serious

threat and the greatest opportunity. Justify your answer.

Depending on how one would look at things, there could be many external threats that

would affect this corporation. A threat is anything that hinders a corporation from accomplishing

strategic competitiveness. Some threats include expensive labor costs and high fuel prices.

According to TranStats, as of March 2014, Delta has spent over $2 million in fuel which is 5%

less than what it spent in fuel last year. (TranStats, 2014) Although, it is saving money on fuel as

of May 2014, the cost still remains a threat because the numbers rise during the summer months

due to increased traveling. According to Airline Financials, its operating cost in 2013 was over

$19 million. That is not including fuel costs. Delta must also be prepared for unplanned costs that

could stem from parts that are damaged because of accidents or inclement weather. With these

amounts being so high, Delta must bring in more than what they pay out. This could be a potential

threat if fewer customers used its airline to travel and began booking cheaper flights. We all know

that Delta doesn’t have the cheapest flights but they still do service many customers. It’s because

of the branding of its company. It has done a magnificent job of promoting who they are and what

they stand for.

An opportunity is anything that helps a corporation to accomplish strategic

competitiveness. Some opportunities that have recently been available to Delta have been to

expand its outreach to small, minority and women owned businesses. It also offers a program

called Delta Sky Media which allows businesses to advertise its brands. This is a great way to

help other businesses and in return, they create opportunities for Delta to increase their earnings.
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Give your opinion on the corporation’s greatest strengths and most significant weaknesses.

Choose the strategy or tactic the corporation should select to take maximum advantage of

its strengths, and the strategy or tactic the corporation should select to fix its most significant

weakness. Justify your choices.

In my opinion, Delta’s strengths are the amenities that are its different types of technology

and employee loyalty. It has much other strength but these two are the greatest backbones of the

company.

Baumwool, Howland, Kruse, Lamb and Shepherd (2008) concluded that:

the types of technology within the aircraft are substantial, ranging from audio and video

entertainment within all of their aircraft (excluding MD-88’s), to their idea of

implementing a feature for passengers to being able to dock their Apple IPod portable

music and video players, allowing them to both charge the device as well as display the

contents onto their own personal TV’s. (p. 5)

Employee loyalty is such an important strength of Delta because when it was going through

financial issues, its employees took a pay cut so the company could use the extra funds to purchase

a bigger aircraft. By doing this, it increased the profits of the company. This generous act

displayed by the employees started a wonderful work relationship among Delta and its employees.

Delta believes in rewarding its employees for great performance and showing them how much

they are appreciated. “In 2014, nearly 80,000 of its employees received the largest profit sharing

checks for their performance.” (Alexander, 2014) It should focus on the differentiation strategy.

The skills and services that are offered through its industry are viewed as one of a kind. Its

weaknesses are its subsidiaries and the voluntary bankruptcy filing in 2005. Delta should continue

to implement the differentiation strategy regardless of some of the minor negative results it has
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gotten from using it. Sometimes differentiation can end in larger costs for the company, but there

must be a balance between the benefits of differentiation and the cost of those activities for the

customer (QuickMBA, 2010).

Determine the company’s resources, capabilities, and core competencies.

Resources, capabilities, and core competencies are the base of competitive advantage.

Resources are what a company relies upon to produce value. They can also be tangible or

intangible. Capabilities explain the company’s skill to build, employ, change, restructure, and

control resources. All three must work together in order to gain a competitive advantage. One

should never believe that core competencies alone will keep the company competitive. Delta’s

resources, capabilities, and core competencies are the same. They include luxury, technology and

employee loyalty. Luxury has the ability to keep the customers comfortable by making

renovations to have more legroom in economy class seats. Delta strives to remain up to date with

the latest technology by allowing customers to enjoy entertainment of their choice on their personal

televisions. Lastly, employee loyalty is very important. Happy employees can take a company a

very long way. Delta and its employees have a bond and commitment that would be almost

impossible to duplicate. Each of these has the ability to gain access to wide variety of markets.

They have helped to establish its brand as an industry leader. They also provide a perceived benefit

to the end product for its customers. “Faith within the company is a big part of customer loyalty

and when one sees that the employees take voluntary pay cuts or refuse to unionize, that shows

that the employees are committed to the company they work for.” (Baumwoll, Howland, Kruse,

Lamb, and Shepherd, 2008) Delta becoming a partner in Orbitz has also assisted in establishing a

brand as an industry leader.

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Analyze the company’s value chain to determine where they can create value using the

resources, capabilities, and core competencies discussed above.

“Value chain analysis allows the firm to understand the parts of its operations that create

value and those that do not.” (Strategic management: Concepts and Cases, 2013) A value chain

consists of primary and support activities. Primary activities involve physical creation, sale and

distribution to buyers, and its service after the sale. Support activities provide assistance that is

needed for the primary activities to take place. An effective value chain is important to Delta

because it helps the company to grow and to remain competitive in its industry. Michael Porter,

the leading authority on value chain and competitive advantage, introduced a basic value chain

that consists of inbound logistics, operations, outbound logistics, marketing and sales, and services

activities (QuickMBA, 2010). Delta has displayed that its value chain is successful in supplying

its customers with their need to travel from one destination to another. Delta understands who its

customers are and what their needs are in order to implement a value chain that is approved within

the company.

Baumwool, Howland, Kruse, Lamb and Shepherd (2008) stated that:

As Delta has proven that international expansion is a more profitable opportunity than

adding domestic flights, the company should pursue this market. This strategic move builds

on Delta’s current lead position in international travel, and it avoids low-cost competition

from Southwest (the airline continuing to expand into and dominate domestic markets).

According to Delta’s plan of reorganization filed in December 2006, Delta plans to

diversify their international capacity. The company plans on having a

domestic/international capacity mix of 60 to 40 in 2009. Currently, the mix is 70 to 30. By

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planning to expand specifically in the Asia/Pacific, Latin America, and Africa/Middle

East/India regions Delta is on-track to sustain profitability in the airline industry. (p. 7)

Delta will continue to grow because they have managed to implement a strategy that keeps it

competitive among its rivalries. Although, they have been through a significant amount of

turbulence as an organization, they have weathered the trials and have continued to remain at the

top.
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References

Alexander, S. (2014). Delta air lines gives employees highest-ever profit-sharing. Retrieved

from www.startribune.com/business/245834561.html

Baumwoll, J., Howland, B., Kruse, J., Lamb, S., Shepherd, J. (2008). Delta airlines: An

analytical view. University of Colorado at Colorado Springs.

CAPA Profiles. (2014). Delta presses forward to build a competitive network in a consolidated

and mature U.S. market. Retrieved from http://centreforaviation.com/analysis/delta-

presses-forward-to-build-a-competitive-network-in-a-consolidated-and-mature-us-

market-101973

Hitt, M. A., Ireland, R. D., & Hoskisson, R.E. (2013). Strategic management: Concepts and

cases: Competitiveness and globalization (10th ed.). Mason, OH: South-Western

Cengage Learning.

QuickMBA. (2010). The value chain. Retrieved from http://www.quickmba.com/strategy/value-

chain/