Introduction to Decision Making

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Like many airlines around the world, leading Australian airline Qantas is facing very difficult times in spite of having a 65% market share in its home market of Australia. Due to rising fuel costs and a slow world economy, Qantas has recently been losing money and their CEO Alan Joyce has some tough choices to make.
One difficult decision for Joyce is whether or not to sell Qantas’ frequent flyer program. It may seem odd for an airline to sell its frequent flyer program, but Qantas’ program is much more than just an airline reward program. Members of this program can gain points not only by flying on Qantas but also through other means such as shopping at one of Qantas’ corporate partners or using one of their credit cards. Points can be redeemed not only with free flights, but also with products from numerous retailers. Over 10 million Australians belong to this rewards program, almost half of the population.
The frequent flyer program is Qantas’ most valuable asset and a sale of this program would help Qantas get out of its current financial troubles. However, selling the program would also mean allowing another company to have access to Qantas most loyal customers including their business class and first class customers. In the long-run, there is potential the sale could backfire and would not be wise.
Do some research on CEO Joyce’s current choice of whether or not to sell their frequent flyer program, and also thoroughly review the background materials on intuitive versus rational decision-making including Buhler (2001) and Kourdi (2011). Your assignment will be to apply the background materials concepts to Joyce’s current big decision.
Some specific articles on Qantas to get you started:
Ross, K. (2014, Aug 27). Qantas CEO faces tough choices. Wall Street Journal [Proquest]
Ironside, R. (2014, Aug 15). Qantas warned to ground plans to sell frequent flyer program. The Gold Coast Bulletin [Proquest]
Gilder, P. (2014, Mar 29). Loyalty future cloudy. The Gold Coast Bulletin [Proquest]
Australia: Qantas frequent flyer hits 10 million member mark. (2014). MENA Report [Proquest]
Case Assignment
Once you have finished reading about Qantas and reviewing the background materials including Buhler (2001) and Kourdi (2003), write a 4- to 5-page paper addressing the following questions:
1. Is the decision whether or not to sell Qantas’ frequent flyer program a strategic or operational decision? Is it a programmed or non-programmed decision? Explain your answer using references to Buhler (2001) or Kourdi (2003).
2. Suppose Alan Joyce decides to take a rational approach to the decision whether or not to sell the frequent flyer program. List a step-by-step approach you would recommend, and include specifics regarding what kind of information or choices should be considered at each step. Do not just list the steps, give detail at each step and use material both from your research on Qantas and from Buhler (2001) or Kourdi (2003) to come up with these steps.
3. Joyce has been the CEO of Qantas for six years and is an experienced airline executive. Given his experience, do you recommend Joyce use a rational or intuitive approach to this decision? If there is a new CEO who comes from another industry and does not have this airline experience, would you recommend they use a rational or intuitive approach? Explain your reasoning, and make references to Buhler (2001) or Kourdi (2003) as appropriate.

Sample Solution

Qantas: A Complex Decision

Introduction

Qantas Airways, Australia’s flagship carrier, faces a critical juncture. The decision to sell its lucrative frequent flyer program is a complex one, fraught with potential benefits and risks. This paper will analyze the nature of the decision, explore potential decision-making approaches, and recommend strategies for Qantas’ CEO, Alan Joyce.

Is the Decision Strategic or Operational? Programmed or Non-Programmed?

The decision to sell Qantas’ frequent flyer program is undoubtedly strategic. It involves a fundamental shift in the company’s business model and has far-reaching implications for its future. As Buhler (2001) defines it, a strategic decision is one that is long-term in nature, affects multiple organizational units, and is irreversible. Selling the program meets these criteria.

Furthermore, this is a non-programmed decision. There is no established procedure or routine for such a complex and unprecedented choice. As Kourdi (2011) suggests, non-programmed decisions require creative problem-solving and judgment, as opposed to relying on standardized procedures.

A Rational Approach to the Decision

A rational approach to this decision involves a systematic evaluation of alternatives and their potential outcomes. Here’s a step-by-step process:

  1. Problem Definition: Clearly articulate the problem: Qantas is facing financial difficulties amidst rising fuel costs and a slowing economy. Selling the frequent flyer program is a potential solution.
  2. Objective Setting: Define clear objectives for the decision. For example, improving Qantas’ financial performance, maintaining customer loyalty, and maximizing shareholder value.
  3. Information Gathering: Collect comprehensive data on the frequent flyer program’s value, potential sale price, impact on customer loyalty, and the financial implications of retaining or selling the program. Analyze the competitive landscape and the potential actions of competitors.
  4. Generate Alternatives: Explore various options beyond selling the program, such as cost-cutting measures, route optimization, or forming strategic alliances.
  5. Evaluate Alternatives: Assess each alternative against the defined objectives, considering factors like financial impact, customer satisfaction, and long-term strategic implications.
  6. Choose the Best Alternative: Select the option that best aligns with the organization’s goals and minimizes risks.
  7. Implement the Decision: Develop a detailed implementation plan, including communication strategies, resource allocation, and contingency plans.
  8. Evaluate the Decision: Monitor the outcomes of the decision and make necessary adjustments.

Rational vs. Intuitive Decision Making for Joyce and a New CEO

Given Joyce’s extensive experience in the airline industry, a combination of rational and intuitive approaches might be optimal. His intuition can provide valuable insights based on his deep understanding of the industry and Qantas’ operations. However, a rational approach will ensure a structured and comprehensive evaluation of the decision.

For a new CEO without airline experience, a more rational approach is advisable. Relying solely on intuition in a complex and unfamiliar environment could be risky. A structured decision-making process will help the new CEO gain a thorough understanding of the issue and make informed choices.

 

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