Aeroplan Company Internal Analysis

AEROPLAN COMPANY INTERNAL ANALYSIS 14

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Aeroplan is one of the major loyalty programs in theUnited States and also offering services worldwide. The company hasmanaged to become one of the best loyalty programs since itsinception in 1984. With its headquarters in Montreal, Quebec, Canada,the company offers services to over 4 million members. The companyhas managed to gain competitive advantage over its competitors due tothe various strategies that it applies. An analysis of the tangibleand intangible resources of the company will indicate how the companyuses them to gain competitive advantage. It offers one of the bestreward programs for flyers who use Air Canada and other widely knownairlines who are partners of Air Canada. Members of the loyaltyprogram are also allowed to earn points through the use of theircredit cards. The company has allocated the credit cards to AMEX bankof Canada (Gibson, 2012). The mission of thecompany is to inspire loyalty among itsmembers and partners, enrich the lives of its members and have ameaningful impact for its shareholders, partners and employees, aswell as for the communities it serves.Additionally, the company has operated on the vision of creatingpositive change through the power of partnership.

Since its inception in 1984, Aeroplan’s operationshave been combined with those of Air Canada. However, in 2002, thecompany was split up and it officially became a subsidiary of AirCanada. In 2008, ACE Aviation Holdings, the owners of Air Canadadisposed all their ownership in Aeroplan, hence making Aeroplanself-controlled. As a consequence, the company changed its corporatename to Aimia. The new corporate name was aimed at establishing andmarketing the company as a complete and diversified customer loyaltyprogram (CBC News, 2013). The new corporatename also reflected the numerous retailers who were participating inthe program. The company has expanded and now it operates the Nectar(UK), Air Miles Middle East and Aeroplan Programs.

The company has strengths and weaknesses that governits operations and future plans. The high profitability of thecompany is one of the major strengths of the company. It is alsoevident that the company has managed to acquire employees cheaply. Inaddition to this, the company has some of the most experiencedemployees with only 20% of them having less than 6 years ofexperience. Research has indicated that over 15% of the employeeshave over 20 years of experience and therefore giving the companyundue advantage over its competitors. Since its inception, thecompany has had a tremendous growth rate, which is also a significantstrength for the company. These strengths among other have beencritically important in ensuring that the company acquires acompetitive advantage over other loyalty program companies. Theprospect of future competition in the field of loyalty programs is aprimary weakness for the company. This is coupled with theprobability of reduced profitability in the future, as well ascompetitive market. It is abundantly clear that an increase incompetitors will translate to immense competition in the market.

Resource-Based View Analysis

Tangible resources

Finance

The gross financial assets of the company haveincreased in 2013 despite a reduction of the total revenue from 2012.As at the end of 2013, the company had a gross financial assetstotaling to 476,257,000 Canadian dollars. This is an increase fromthe financial assets of the previous year which were 448,604,000Canadian Dollars. The revenue that the company generated in 2013indicated a huge decline. From the 2013 financial statements of thecompany, the company had a total revenue of $1,673.5 million. This isa $575.4 million deficit as compared to 2012’s $2,248.9 milliontotal annual revenue. The financial analysis of the company carriedout in 2013 by PWC clearly indicate the tangible resources in termsof finances of the company. The table below is the financial overviewof the company.

Retrieved from:http://www.aimia.com/content/dam/aimiawebsite/financial_reports/2013/Annual_Reports/AnnualReport2013EN.pdf

The table above highlights the financial assets ofthe company for the year 2013 and 2013. It is clear that the companyhas a financial resource base which enables it to operate efficientlyand expand its operations to other regions. The total equity for thecompany after deducting the liabilities from the assets indicatesthat the financial status of the company is secure.

The company has numerous physical resources in termsof buildings and equipment. According to the financial overview tableabove, the company’s physical resources in terms of equipmenttotals $ 26,915, 000. This was an increase from 2012’s $ 23,444,000. A vast majority of these resources comprise of the computersand office spaces that the company has acquired over time. Thecompany has also invested heavily in the technology world. It hasadopted sophisticated software for managing data. Microstrategy isthe technology that the company settled for in order to effectivelymanage its loyalty programs. The two main call centers are also wellequipped with modern and up to date technology and equipment thatenable the agents to handle the needs of the clients. The investmentin credit cards where members can collect miles through the use ofcredit cards is also a resource that generates income for the company(Gibson, 2012).

The organization of the company offers it a resourcethat enables it to achieve a competitive advantage over other loyaltyprogram companies. The divisions that exist in terms of managementare vital for the operations of the company. For instance, thecompany has a chairman, Chief Executive Officer, executives and otheremployees, as well as agents who work in the call centers (CRHA,2011). This organizational structure is a vitalresource for the company and it enables the company to get therequired competitive advantage.

Intangible resources

These are the resources that the company owns thatcannot be copied or emulated by its competitors easily. They are thekey non-physical resources that drive the vision and mission of thecompany. Human resources is one intangible resource that this companyhas invested heavily on. It is evident from research that theemployees of the company has vast experience and only a smallpercentage has an experience of less than 5 years. The company offersadequate remuneration, as well as sufficient job satisfaction for itsemployees. Research has indicated that the company seeks to be theleading employer in Canada (Gibson, 2012).This is a clear indication that the company has decided to investimmensely in the human resource capital. Employee engagement is alsoa critical element at Aeroplan Inc. Employees opinions are always putinto consideration when decisions are being made by the management.

Innovation and creativity are at the core of thecompany’s operations. The company provides an environment thatenables its employees to be both creative and innovative. The use ofcredit cards to collect miles was a major innovation by the companythat gave it a much needed competitive advantage. The company usesit’s expertize to build the best propriety loyalty programs for thebest brands in the world. The management of coalition loyaltyprograms has been done through the use of the emerging mobile,digital and social communications (CRHA, 2011).The company uses innovative ways to unlock customer data and offerthe much needed customer insights to its clients.

One of greatest intangible asset that the companyhas is its reputation. The company has largely been known as the bestcompany offering loyalty program in Canada and overseas. The companybrand, Aeroplan, is known world over and this reputation has enabledthe company to acquire numerous customers who join as a result of thecompany’s reputation. It is evident that the company offersexcellent services to its clients and therefore the good reputation.Even after the company changed its corporate name Aimia, research hasshown that the reputation of the company was not damaged. Thecoalition partners are also a major boast towards the company’sreputation. The company’s partners such as Air Canada and StarAlliance are well known and reputable airline companies worldwide(CRHA, 2011).

The many years of operation by the company hasoffered the required skills, abilities and knowledge to the company.With over 35% of the employees having over 10 years of experience and16% having more than 20 years of experience, it is abundantly clearthat the company is not short of skills and abilities. Research hasindicated that the company hires some of the best skilled employeesand also the ones with immense experience. Teamwork is a keycomponent of the company’s operations. This is a skill that thecompany looks after in all it’s over 4000 employees in over 20countries that it operates. Leadership skills is another attributethat the company looks after in its employees. With the innovativeculture of the company, information technology knowledge is a vitalattribute that the employees must have. It is also evident that theemployees, especially the ones in senior positions, must have theability to travel frequently as need be. The company combines boththe tangible and intangible resources to enhance its performance.Although the tangible resources may be emulated by other rivalcompetitors, the intangible resources are a primary of the company’sperformance (CRHA, 2011). The company uses itscompetitive human resource capital together with the physicalresources and its finance base to advance its operations.

Value chain analysis

The value chain analysis at the company is aimed atadding value to the data that the company collects on behalf of itsclients. The core aspect of the value chain process is to ensure thatthe end product of the value addition process is valuable andacceptable by the client. Aimia focuses mainly on the customer data.The inbound logistics seek to analyze the data and provide theclients with useful customer trends, preferences and shopping trends.With the use of the Self-Serve software, the company has managed toprovide deep insights into the customer’s spending and shoppingtrends (AIMIA, 2008). The inbound logisticsalso include the use of resources, equipment, skills and knowledge,as well as technology to produce the required product or service.

The operations of the company seek to provide thebest services to the clients. Customers of the coalition partnersmust be satisfied. The operations involve the analysis of thecustomer data and the provision of customer insight information tothe clients. The operations are well organized and structured withevery employee and every department working on specific tasks. Theoutbound logistics involve the delivery of analyzed customer data tothe clients. The analyzed data contains critical information withregard to the customer (Society of Management Accountants ofCanada, 2009). The information contains customer’slocation, shopping trends, as well as the loyalty of the customer andhis or her preferences. The provision of points to the customers isalso a key outbound logistic of the company. The points are rewardedon the basis of the amount a client spends on the partner companies’products and services.

Marketing and sales are a key components of Aimia.The company continuously markets its services worldwide. This is donethrough banners, posters, radio and television. It association withAir Canada and Star Alliance has also been a major marketing tool.The company’s procurement management enables it to purchaseproducts and services that of high quality and that serve the purposethey were intended for. The procurement process is a thorough onewhich involves a complex process of selecting vendors based onprices, reliability and their financial position (AIMIA,2008). The company has over time been in the frontline in terms of technology. The company’s management employs themodern technology and current versions of software to analyzecustomers’ data. The conversion and calculation of reward points isalso done through recent technological advances.

The human resource management at the company hasbeen a crucial part for the excellent performance of the company.Employee engagement has been encouraged by the management since theinception of the company. The management of the company listens toevery employee and their opinions are taken into account duringdecision making. The remuneration of the employees is also attractiveand the working environment is motivational (AIMIA, 2008).The management has also been keen on enhancing teamwork amongstemployees. This has been a major boast for the success that thecompany has achieved. The genera administration of the company islargely in the hands of the CEO and the executives. The chairman ofthe company also plays a major role in the general administration ofthe company. The democratic decision making process in the companyhas been extremely successful in engaging all the stakeholders.

Financial statement analysis

Retrieved from:http://www.dailyfinance.com/quote/tsx/groupe-aeroplan-inc/aim/financial-statements

The above table is a financial statement record ofthe company since 2010 till 2013. It clearly indicates that sales thecompany has been making over that period. It is worth noting that thesales as of 2013 have reduced significantly as compared to 2010, 2011and 2012. This can be attributed to immense competition that thecompany is facing. There has also been immense market competitionhence the reduction. The cost of sales has remained more or less thesame. This might be interpreted as a failure by the company to adoptnew ways of enhancing sales. The reduction in sales can also beattributed to failure by the company to invest in research anddevelopment. It is clearly indicated that the cost of research anddevelopment is nil. The main income avenue for the company in thelast three years has been the operations. However, 2013 was not agood year for the company in terms of operations. These results arein line with industry standards. The economy of the world has been onthe downward lane and therefore customer spending has largelyreduced.

Strengths and weaknesses

The success that the company has recorded can beattributed to some of the strengths that it has. Human resourcecapital has been identified as one of the primary strengths of thecompany. It is evident from the above research that the company’semployees have immense experience, skills, knowledge and abilitiesthat enable them to execute the mandate of the company. Thecontinuous trend of growth has also been a major strength for thecompany. This is besides the strong brand and partner companies thatgive the company the best reputation. The company has also been onthe trend of profitability and that is also a significant strengthwithin the company.

The company is not immune to some of the majorweaknesses that are facing a majority of global companies today.Competition from rival companies is a primary weakness for thecompany. This is coupled with a competitive market for customers. Thecompany’s strengths tend to outweigh the weaknesses. The companyhas been able to provide quality services that are efficient to itscustomers. The innovative strategies that the company has beenadopting have been instrumental in earning the company a competitiveadvantage. It is abundantly clear that the customers haveincreasingly responded to the company’s services. This is evidencedby the huge number of customers ranging over four million that havejoined the loyalty program.

References

Gibson, H. (2012).&nbspFinancial Reporting and Analysis +Thomsonone Printed Access Card. South-Western Pub.

Society of Management Accountants of Canada. (2009).&nbspManagementfor strategic business ideas. Hamilton, Ont: CMACanada.

CBC News. (2013). Aeroplan program set to switch to TD from CIBC.Retrieved from: http://www.cbc.ca/news/business/aeroplan-program-set-to-switch-to-td-from-cibc- 1.1339696

AIMIA. (2008). Groupe Aeroplan Brings Customer-driven Insight andData Analytics Business to North America. Retrieved from: http://www.aimia.com/content/aimiawebsite/global/en/media-center/news- releases/viewer.html/en/groupe-aeroplan-brings-customer-driven-insight- and-data- analytics-business-to-north-america-

CRHA. (2011). Aeroplan Canada Becoming one of Canada’s 50 bestemployers. Retrieved from: http://www.portailrh.org/c360/cas/pdf/2011_Casfinal_en.pdf