of UAL and Southwest
Diagnosis of United Airlines Organizational Design based on the characteristics of analytical model presented in Burton et al. (2006).
Table of Contents
IUnited Airlines’ Organizational Design Diagnosis3
I United Airlines’ Organizational Design Diagnosis
According to Burton’s model, United Airlines is in the high efficiency but low effectiveness quadrant also known as quadrant B (Burton et al., 2006). Currently, UAL focuses mainly on efficiency and emulates new products offered by other airlines in an attempt to increase its effectiveness. However, the main focus is to lower costs by lowering the pay of their employees and increasing efficiency through more efficient fuel use. One such program United uses to achieve its high efficiency is NextGen Air Transportation System. According to the website, “NextGen plans to reduce jet fuel consumption by transforming air traffic control from a ground-based system to a satellite-based system that enables more efficient flight planning” (www.united.com). NextGen Air Transportation System outlines United’s commitment to efficiency through improved air traffic control processes. Strategy
Following the Burton et al. (2006) model, UAL’s strategy is that of an analyzer without innovation. This strategy is defined as high on exploitation but weak on exploration. The same model defines the analyzer without innovation strategy as similar to the defender strategy but with a passive innovation or copy strategy. We consider the company high in exploitation because it focuses on maintaining the organization’s position in the market. During our interview with UAL employees, one interviewee stated, “United is under a lot of pressure to compete with the low-cost airlines” (Joost, 2011). Because United competes with other airlines on cost, its focus remains on efficiency rather than innovation. Another characteristic of the analyzer without innovation is the copy strategy. Burton et al. (2006) state that companies following this strategy tend to mimic the successful products or services of other firms. UAL routinely utilizes the copy strategy, initiating changes only when proven in the industry by other airlines. One employee interviewed explicitly outlined the copy strategy. “UAL has never been a leader. They never take initiatives and the products they buy are not the best in the industry” (Joost, 2011). One typical example of a successful UAL copy strategy has been the introduction of in-flight Wi-Fi. However, not all imitation strategies succeed. In 2004, UAL announced TED, a new low-fare service (www.united.com). The TED initiative tried to compete in the low-cost airline market but only lasted 4 years. A flight attendant interviewed said, “TED was a bad idea because United was trying to compete with Southwest but their costs were not that low” (Joost, 2011). Environment (complexity)
The environment in which UAL competes is a turbulent environment. According to the Burton et al. (2006) model, a turbulent environment has high complexity and high unpredictability. We consider the environment highly complex because there are a large number of factors that can potentially influence it. Some of these factors are the prices of competitors, the emergence of low price competitors (our comparative company Southwest, for instance), government regulation, the price of fuel, fears of terrorism, and substitutes for commercial air travel. We also consider the environment highly unpredictable because it is very difficult to predict key factors...