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Case Study : Norwegian Air Shuttle Airlines Assignment Help

Norwegian Air Shuttle Aspires to Become the Cheapest Global Airline

It's snowing in Copenhagen as Norwegian Air Shuttle Flight DY7041 lifts off. There are nearly 30 passengers on board, most of them Norwegians, Swedes, and Danes eager to escape the gloom that engulfs their part of the world in late November. Today they will arrive in Florida faster than usual. This is the first direct flight from Scandinavia to Fort Lauderdale. And it's a bargain: The tickets are a fraction of what larger airlines charge.

Norwegian Air Shuttle Chief Executive Officer Bjorn Kjos has come along to celebrate the occasion.…

Norwegian is Europe's fourth-largest discount airline. Until recently, it was little known outside Scandinavia. Then, in 2012, Kjos made the largest airplane order in European history, buying 222 jets from Boeing and Airbus Group for $21.5 billion. Most of these are narrow-bodied Boeing 737 Max 8's and Airbus A320neos that will begin arriving in 2016. Kjos will use them to increase Norwegian's presence in Europe and challenge the top three discount carriers: Ireland's Ryanair, Britain's EasyJet, and Germany's Air Berlin. Last year, Norwegian acquired its first two Dreamliners, which list for as much as $289 million each. Kjos is using these wider-bodied jets to offer cheaper international flights to distant places such as New York, Los Angeles, and Bangkok, undercutting established carriers in Europe and the U.S. Norwegian's $180 tickets between New York and Oslo cost 10% of the equivalent ticket on British Airways. In effect, Kjos wants Norwegian to become a global version of Southwest Airlines.

Other upstart airlines have tried this and failed. Kjos says Norwegian will succeed because it has the Dreamliner and a new group of travelers to fly: the emerging middle-class citizens of China and India. He predicts that in the next decade there will also be 500 million new airline passengers, and he hopes to attract them with low fares.

Kjos will have to do many things right for it all to work, and he's already run into turbulence. He narrowly averted a strike by 600 pilots in November. They are unhappy with his plan to base Dreamliner flights outside Norway and to staff them with lower-paid workers from Thailand and elsewhere. The Dreamliner still needs debugging. Kjos's new jets have been grounded repeatedly by technical problems.…

Four U.S. airlines are trying to keep the U.S. Department of Transportation [DOT] from allowing Norwegian flights into the country because they worry that their foreign competitor will launch what they describe as an unfair price war with them. Kjos, however, doesn't think anything will get in the way of his plan to reshape international travel. “In the future, you will travel to Asia for nothing,” he says, “You think I'm joking. You wait and see.” 

Obscure outside the aviation industry, Kjos is a celebrity at home; he's Norway's Richard Branson. In the early August, Kjos introduced low-cost flights to a region that has historically been dominated by Scandinavian Airlines (SAS). At the time, SAS, which is controlled by the governments of Norway, Sweden, and Denmark, had some of the highest fares in Europe. “He has changed the lives of many, many Scandinavians,” says Hans Erik Jacobsen, an analyst at First Securities ASA…

The company went public in December 2003 at 32 kroner a share. Then, Kjos says, SAS reduced its prices in an effort to destroy its rival. (SAS denies that this was its intent.) Norwegian again lowered its prices. Its revenue dwindled, along with its stock price. … Then, they say, they learned from government investigators that SAS had been tapping into Norwegian's computer system and using data about its ticket sales to underprice it. Norwegian sued SAS for illegally using its trade secrets, eventually winning a 160 million kroner judgment in 2010. SAS says it accepts the court judgment.

Kjos says the revelations ended SAS's predatory pricing, and Norwegian had its first profitable year in 2005. But Kjos soon had something else to worry about: rising oil prices. Oil had soared from $25 to $75 per barrel in the previous five years. Kjos and his top executives modeled what would happen if oil prices continued to climb at that rate. “We found out … if we hit $120, we're going bankrupt,” Kjos says. Norwegian's planes were burning too much gas. The company needed a new fleet to survive.…

In August 2007, Kjos reached an agreement to buy 42 new jets from Boeing for $3 billion. Frode Foss, Norwegian's CFO, said the company couldn't afford it. “Frode, would you like to go bankrupt with old airplanes or with new airplanes?” Kjos swaggeringly replied. He later increased the order to 84.

Three years later in 2010, revenue and profit had more than doubled. Norwegian was flying twice as many passengers and routes. The new planes “really enabled them to drive down the cost level,” says Jacobsen. “It was a big step forward.” Later that same year, Kjos ordered Norwegian's eight Dreamliners, but he also concluded that his newish fleet of short-range planes was already becoming outmoded. In 2012 he and [Norwegian Airlines chairman of the board Bjorn] Kise took advantage of the euro crisis to get favorable terms from both Boeing and Airbus for 100 planes.…

Norwegian's international routes will prevail, Kjos says, because the Dreamliner burns much less fuel than previous jets. “The Dreamliner is the first airplane that can do it,” he says. He's also counting on lower personnel costs. Although the airline is headquartered in a country with some of the highest salaries in Europe, Kjos is trying to get around this by basing flights in lower-salaried countries such as Thailand. That's why Norwegian's pilots wanted assurances that he wouldn't try to use geography to cut their salaries.…

Norwegian also faces opposition in the U.S., where American Airlines, Delta Airlines, United Airlines, and US Airways are urging the federal government to reject an application by Norwegian Air International. The company is a Norwegian subsidiary that Kjos has set up in Ireland to operate its Dreamliner flights. Norwegian's critics say Kjos is doing this so he can hire cheap nonunion pilots and cabin crews. “[Norwegian's] scheme must be immediately and unequivocally rejected,” Lee Moak, president of the Air Line Pilots Association International in Washington, said in a statement last month. “The DOT must not permit U.S. airlines and their employees to face an unfair competitive advantage from this runaway shop.” A Norwegian spokesman, Lasse Sandaker-Nielsen, says the company isn't doing anything improper and its critics are making “false and misleading statements.”

As for the Dreamliners, they have been problematic. The U.S. Federal Aviation Administration ordered Boeing to stop delivering them last year until it fixed their lithium batteries, which had caught fire. Norwegian's Dreamliners never burned, but one jet was grounded in Bangkok in September [2013] because of pump problems, stranding 200 passengers bound for Stockholm. In December, Stockholm-bound Norwegian customers were stuck in Fort Lauderdale before Christmas because of a disabled Dreamliner. On New Year's Eve, 276 passengers headed for Oslo spent the night stewing in hotels near John F. Kennedy International Airport in New York because of brake problems on one of the jets. Norwegian's Sandaker-Nielsen says the company apologizes for the delays.…

Kjos responded to the latest crisis by doubling down. He announced in December that Norwegian would lease two more Dreamliners.

Assignment Questions:

1. What are the biggest challenges Norwegian experienced in trying to expand its airline across the globe? 

2. To what extent did you observe examples of ethnocentric, polycentric, or geocentric attitudes in this case? Provide examples to support your conclusions. 

3. Identify cultural differences that are likely to arise between Norwegian employees working in Denmark and Sweden and Thailand. How might these differences affect interpersonal interactions, and what can the company do to reduce any unintended conflict from these differences? 

4. What are the most important lessons to be learned about global management from this case? Discuss. 

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Answer 1:

Here, the major challenge is about how Norwegian Air has been facing the problems related to the discounting carrier with understanding how to fight with the other competitors. Here, the planning needs to be done to ensure about different competitors like EasyJet and Ryanair. US airlines are working on US Department of Transportation with allowing Norwegian flights into the country. The foreign competitors are seen to be launching the unfair pricing war with them. After this, there are other international routes which are seen to be prevailing mainly because the airplanes are burning a lot of the gas. Hence, the Kjos are working on the costs with lower personal costs and working on basing flights for lower salary countries. The Norwegian also tend to face the problems and opposition in US where Delta Airlines and US Airlines are having issues to urge for the federal government with rejecting applications by Norwegian Air International (Taneja, 2016). The US Federal Aviation has ordered Boeing to stop the delivery till there is a fixation of the lithium battery, which could cause fire. Hence, it can be seen that the Norwegian Dreamliners have been facing problems which are related to the passengers for the jet that seem to be grounded in Bangkok.

Answer 2:

The ethnocentric standards in the case study are mapped through focusing on different methods for international recruitment. The planning is about the human resources with right person looking for right job for the International business. Here, the basis is mainly about handling the candidates and planning about the organizational culture. The standards are related to ethnocentric attitude and planning about how the employees look for flights in city of Norway. Also it was seen that the members of the staff do not tend to look for the jobs to be at risks. Hence, the example is from US mainly because they do not want the flights to be coming from US.

The geocentric attitudes have been with talented staff and the eligible candidates. They are looking for the field efficiency and look for the job appointments that are seen to be irrespective of any nationality. The attitudes are generally planned in the form where the firms are global and they tend to follow through the globalized business strategy. There are situations which are for examining the geocentric attitudes (Halpern, 2016). The challenge is about approaching towards international services in Thailand and planning about employees or other crew in the different countries with hiring attendants in US.

Answer 3:

The events are related to the factors where the individual needs to travel and handle any of the unintended conflicts. The planning needs to be done for the cultural differences, provisions and the work. They tend to affect the relationships which is not easy and so this also affect the overall well being of the work. The difficulty is in adjusting the foreign culture and the practices that is related to the diminishing capacity of work. It is seen that the countries like Denmark, Thailand and Sweden have been individualized with operations that are not only favourable for employees but also focus on the foreign country patterns (Veretekhina et al. 2017). The language and communication is for the workplace standards and planning the issues related to hindrances. This could be managed if there has been a proper understanding for the peer. The planning is done through language and communication that has to be in workplace and is affected when one does not understand the other. This tend to create any of interpersonal relationships with achieving any of the common goals. Here, Norwegian Airlines have been opted for utilizing any of the cheap labour which can directly impact the travel or maintenance of the individual lifestyle, if there has been accustomed adequate pay.

Answer 4:

Considering perspectives for the global management, there are knowledge about the skills and the communication with understanding different culture and familiarizing oneself (Hanninen, 2017).

With some knowledge, there are religion language with helping to communicate and effectively understanding about the native language that needs to involve about the foreign counterparts. The understanding is about the language with communicating purpose of meeting. The communication is important for the work. Hence, for every culture, it is important to plan about the accepted region culture which is important. The countries have been involved with the different practices and the region culture and the geographical area, which helps in global management to understand the people habits or problems. The consideration is about minimizing or avoiding any misunderstandings.

 

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