In a world where you can contact each other immediately the rise of mobile phones has caused commerce to drastically shift over the past decade. Internet giants like Amazon have created an effective monopoly on a lot of the transportation and logistic platforms due to the sheer magnitude of the demand of its customers. Given this, the aviation industry has taken a pretty big toll in terms of business direction. In the past, logistics was a huge factor in an aviation company’s overall profitability but due to the negotiating power of its largest customers, aviation has shifted towards a more balanced approach between commercial and recreational transportation.
Why does this matter? Since the demand for recreational travel has been steadily increasing with no sign of drastically changing, aviation companies must find a way to recoup the missing revenues due to decreasing margin in commercial transportation. Aviation companies in the US have seemingly turned to a horizontal business integration model. Companies like West Airlines have opened up online E-commerce branches to cater to their own customers as well as gaining new market share in a different industry. While this shift in focus can be seen as a way to diversify a firm’s income, it also comes with a risk of losing the core values and entering a market that its not ready to target. Let’s go over a case recently that resulted in a slight hiccup for West Airlines.
West Airlines is an aviation company that has specialized in traditional shipment services as well as recreational travel for the past 52 years. The company has seen a decreasing profit margin for its commercial transportation wing and decided to go into the online e-commerce space. One of its first projects focused on providing services to various video games like Runescape, WoW, and other popular online MMORPG’s. While you may think that’s an extreme shift in business focus but West Airlines identified a market that shows an increase in demand that doesn’t have the traditional structure in place. One example of this type of diversification is the Chinese mining firm Shandong Hongda Mining Co’s acquisition of the major games studio Jagex.
West Airline’s e-commerce division has been operational for the past 3 years. Although the current profitability of this wing hasn’t show as good promise as one would want, the company has made great advances in the ways it serves its customer. By being actively involved in the E-commerce market, West Airline is able to better adapt the policies and procedures of the other portions of its business to cater to a more “tech-savvy” customer base. One example of West Airline’s ventures is this Runescape GP website that focusing on providing RS related needs to video games. They use industry tactics like writing articles to better inform the customer to establish authority and credibility for its own services. This article that outlines OSRS money making methods has been viewed by thousands!
In essence, this case study of West Airline simply shows a very strange method that a traditional aviation company has attempted to make up for the decreasing profits of its core competencies. Although it is may not be the most profitable venture for these companies or the most optimal use of its resources, we can agree that entry into various markets like e-commerce can allow traditional companies to break down its preconceived notions on the way it should conduct business. In order to succeed in the 21st century and beyond all companies should start to find ways to improve their business processes.