6.
With increased globalization and technological advancement,
businesses continue to face rigorous competition - case in
point, GoGo Airlines. Embarking on a new low-cost carrier, the
air will be saving on service, operations, and overheads (ICAO,
2003). In setting its strategy, the management should use the
5-step approach outlined by Atrill & McLaney (2021) and take
SWOT into consideration. In this regard, the project's strategic
decisions include but are not limited to coming up with the
new airline's governance policy, carrying out competitor's
analysis which can be done by using Porter's 5 forces, and the
cost of capital needed to implement the new project (KFKB,
N.D).
The tactical decisions will require information from the
strategic level. Thus, at this level, handled by middle
management, regular quantitative information is also required
from the operational level. Some of the decisions at this level
will include deciding on the size and structure of the
workforce, measuring productivity levels, and controlling
budget and running costs (FDM Lecturecast 1, N.D. & KFKB,
N.D.). Moreover, other tactical decisions such as cash flow
forecasts and short-term purchasing requirements will also
take place. These decisions, however, are more detailed than
strategic decisions.
In addition, the operational decisions, which will deal with the
day-to-day running of the new business, will include
scheduling employees' work hours, purchasing and keeping
track of office supplies, and decisions on employee
professional development. Overall, operational decisions are
more precise (KFKB, N.D.). However, due to the increase in
volatility in the financial markets, inflation might affect the new
launch, thus resulting in a loss of customers.
Subsequently, after looking at the time, resources, and risks
associated with the investment, the CEO can use a discounted
cash flow technique, the NPV, to evaluate the project's
success. Choosing this forecasting technique will show the
CEO the value for money invested by showing future cash flow
(FDM Lecturecast 1, N.D. & FDM Q&A 1).
How can Gogo Airlines cut operational costs on its new low-
cost airline, MegaSaver?
