Vertical Integration: a Case Study of Scandinavian

2140 Words Jan 27th, 2013 9 Pages
VERTICAL INTEGRATION: A CASE STUDY OF SCANDINAVIAN AIRLINE SYSTEM IN 1988

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Vertical Integration: A Case Study of Scandinavian Airline System In 1988

Introduction

The Scandinavian Airlines System (SAS) applied vertical integrations strategic management approach as a way of overcoming the challenges it faced especially in the 1980s. The threats in the aviation environment such as competition from other major airlines caused the profitability of the airline to decline steadily. Because of the new management, which began with Jan Carlzon as the company’s CEO, there was complete company restructuring and thus the airline began to grow steadily through vertical integration
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(1988, p. 33). Good management especially by the company’s former CEO Jan
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Carlzon who saw the company through the worst of challenges during the 1980s enabled the success of the airline. The CEO maintained that businesspersons had to travel both in the good and bad times. The motivation behind the vertical integrations a management strategy by the airline stemmed from the need to increase its share in the air travel and leisure market. This was after the realization that the market trends at the time were very competitive hence there was a need to use proper management strategies so that the airline would stay in the market.

The advantages of vertical integration came in handy in the period around 1988 by the SAS, which is a product of a difficult collaboration of three fleets from Norway, Denmark, and Sweden. Ghoshal et al. (1988, 44) say that the difficulties in structure of the airline resulted from the fact that the airline became a consortium and control was distributed among respective governments. The need for vertical integration was thus motivated by the need for improving decision making and reducing the inefficiency of everyday operations of the airline. Additionally, there were problems in the route system of the airline, which needed immediate attention. SAS faced stiff competition from airlines in Europe,
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