Executive summary

This written analysis of case related to Continental Airlines, and how it has evolved over the years. First explain company vision and mission statement, company objectives as well. That written analysis of case about company strategic position as well as various matrixes that will help us identify, which strategies need to be adopted by Continental Airlines. On other side we can easily assess their pros and cons. Moreover, as mentioned already, matrices such as external evaluation matrix, internal evaluation matrix, competitive profile matrix, SWOT matrix, BCG matrix, IE matrix, SPACE matrix and the Grand Strategy matrix have all been identified. As a result analysis will formulate and recommend alternate strategies for Continental Airlines and assess in order to find out which will and will not be effective for the company.

IntroductionContinental Airlines Company was integrated in the early 80s of the 20th century and presently one of the major airlines operated in US along with a business portfolio of transporting passengers, cargo and mail handling operations. Voted as the fifth best airline by passenger miles, Continental along with Continental Micronesia operates regional flights and international flights throughout the different hubs in the world.October 1st, 2010 was an important date in the history of airline business industry. Two of the worlds best airlines United Airlines and Continental Airlines to form the new United Continental Airlines in order to deliver consequential prosperity and profitability, while maintaining a sustainable long-term significance to their esteemed stakeholders across the globe.United Continental Holdings, Inc. is the investment company for United Airlines and Continental Airlines served by more than 80,000 employees worldwide and operated worldwide with the corporate headquarters in Chicago. While its core operations are from Houston in the United States of America. Both the companies have been in the industry for decades and committed in providing the customers and employees best in class service. The new holding company will continue to manage as two separate companies till they manage to get hold of the single operating certificate from the Federal Aviation Administration. According to the Continental airlines website, the airline will be operating under the united name, and aircraft will be having the Continental logo and colors to retain the companys strong brand image.

Mission and Vision Statement

Vision:To be recognized as the best airline in the industry by our customers, employees, and shareholdersBy carefully analyzing Continental Airlines vision statement we can clearly construe that they hope on becoming the best in what they do. Continental Airlines aim to attain the ultimate level of satisfaction from not just its customers, but also from its employees and shareholders. Its vision statement places importance on both its internal and external customers, carefully highlighting their significance to their success. Continental has discovered the fact that many companies tend to overlook; that is, in order to be triumphant in the airline industry they will have ensure the satisfaction of its employees, who In turn will deliver quality services to their customers that will drive them to come back for these services time and again. Mission:Even though Continental Airlines forms an evident name in the airline industry, it does not have a predefined mission statement. It has instated a vision, as mentioned above, and it has various strategies that it adheres by that make it possible for it to work towards this vision. However, from a careful study done on its overall business operations and its guiding principles and values, we can deduce that Continental Airlines mission is to be the sort of airline customers want to fly on, and the airline people want to work for. This is also clearly depicted in their vision, and hence is a perfect fit as Continental Airlines Mission statement.

Strategies

The mission statement for Continental Airlines is quite diverse, and is broken into 5 key areas, each of which clearly define what it plans on doing in the future, and how it plans on going about it.

The Go Forward Plan is Continentals rudimentary element for success. This ever changing, four point plans enables the company to formulate and transcend its goals. Since its development in 1995, this plan has led the company to much greater heights of excellence in terms of service and finance.

The Fly to Win element highlights the need to attain top quartile industry margins. This means that they hope to expand their international airline connectivity and go on eradicating non value added costs.

The Fund the Future element focuses on developing Continentals franchises and set the stage for future growth. In addition, it focuses on their fleet plan and hub real state and ensuring strong cash flow and financial flexibility.

The Make Reliability a Reality element puts forth the ideology of creating an industry leader of a product that Continental is proud to offer. In addition, they aim on becoming at the top in terms of on time arrivals, baggage handling, complaints and involuntary denied boardings. They also hope to improve their product every chance they get, and in turn improving their overall company image.

Finally, their Working Together element states that they want to encourage a culture where people enjoy coming in for work every day and are recognized for their contributions in the companys success. In doing so, they want to place an emphasis on safety, employee programs and communication. (Mission statements, 2010)

Opportunities and Threats

Following are the Major identified external opportunities and threats of Continental Airlines. Identifying these factors help the company to evaluate the its current position in the competitive market and convince the management to analyze the current market in order to set the strategies and goals also these are the key points to evaluate the industry analysis, the external factors evaluation. External Opportunities:

Continental airlines should consider researching the international markets, as they face intense competition from the local market. The installation of winglets in an attempt to lessen costs. The EU-US Open Skies provides Continental with an opportunity to broaden its base in terms of connectivity. Merger with the United Airlines in October 2010 Growing demand for travel at 3.2% growth in 2011 Being more technologically advanced and using the internet to reduce their costs. 42% increase in the Hispanic population in US over the last decadeExternal Threats:

Rise in fuel costs and domestic competition. Elevation in security costs due to the risks of hijacking and terrorism. The fact that its rivals have recovered from bankruptcy and recovered back much stronger due to their ability to reduce their costs. The introduction of new aircrafts by the rivals and the fact that this would directly contradict Continentals young and more fuel efficient aircrafts. Entry of international airlines into the domestic services Ongoing pricing competition of budgeted airlines in the marketAirline industry as a whole is vulnerable to economic cycles and big swings in bottom-line performance

Competitive Profile Matrix (CPM)

Continental AirlinesAmerican AirlinesDelta Airlines

Critical Success FactorsWeightRatingWeighted ScoreRatingWeighted ScoreRatingWeighted Score

Financial Position0.1520.3030.4540.60

Customer Loyalty0.1020.2040.4030.30

Market Share0.0520.1040.2030.20

Management0.1540.6020.3030.45

Advertising0.2040.8030.6040.80

Price Competitiveness0.1530.4530.4530.45

Global expansion0.1540.6030.4540.60

Product quality0.0540.2030.1540.20

Total3.253.03.6

Interpretation:

The competitive profile matrix for Continental Airlines categorizes the companys crest competitors such as American Airlines and Delta Airlines. Companies are then evaluated on the basis of significant success factors of the airline industry and the success factors are weighed from (0.0, not important to 1.0 very important) and the ratings pass on to the strengths and weaknesses by 4 being the major strength, to 1 for major weaknesses. Industry analysis: External Factors Evaluation MATRIXOPPORTUNITIESWEIGHTRATINGWEIGHTED SCORE

Continental airlines should consider researching the international markets, as they face intense competition from the local market. 0.0730.21

The installation of winglets in an attempt to lessen costs.0.1040.40

The EU-US Open Skies provides Continental with an opportunity to broaden its base in terms of connectivity.0.0940.36

Merger with the United Airlines in October 20100.1040.40

Growing demand for travel at 3.2% growth in 20110.0420.08

Being more technologically advanced and using the internet to reduce their costs.0.0830.24

42% increase in the Hispanic population in US over the last decade0.0320.06

THREATS

Rise in fuel costs and domestic competition.0.0920.18

Elevation in security costs due to the risks of hijacking and terrorism.0.0830.24

The fact that its rivals have recovered from bankruptcy and recovered back much stronger due to their ability to reduce their costs.0.0610.06

The introduction of new aircrafts by the rivals and the fact that this would directly contradict Continentals young and more fuel efficient aircrafts. 0.0720.14

Entry of international airlines into the domestic services0.0820.16

Ongoing pricing competition of budgeted airlines in the market0.0830.24

Airline industry as a whole is vulnerable to economic cycles and big swings in bottom-line performance0.0320.06

TOTAL12.83

Interpretation:The matrix above recapitulates and estimates the external factors that give a considerate view of how effective the companys strategies are used in the capitalization of their opportunities and disclose the point of threats that are active. The weights are set between 0.0 and 1.0 depending on its level of importance depending on how well the Continental Airlines responds to the above factors considering its current objectives and strategies. The total weighted score of this matrix reveals that Continental Airlines have a strong score of 2.83 which is higher than norms.

Internal Strength And Weakness

The strengths and weaknesses are the major key points of companys internal position analysis and they are identified and utilized in order to make the internal investigation, which is the internal evaluation matrix.Internal Strengths:

The fact that the airline provides customized services in accordance to the destination its travelling to. The company rose to profitability after being hit by severe losses for four years straight. Its young management team that has been supporting it since the mid 90s. Its various incentive programs to keep its staff motivated to aim towards on-time arrivals. The fact that it serves more international markets than any other U.S. aircraft Houston hub serves booming energy market; Newark hub serves huge New York market and is a major access point to Europe Its fleet comprises of mainly Boeings and is one of the youngest globally. This leads to increased efficiencies and major cost reductions. Received an array of awards for service quality and overall reputation Increment in gross profits and reductions in overall costsInternal Weaknesses:

The fact that its Go forward plan does not attend the environmental issues directly. The airline has faced a decrement in its overall AQR scores. Service quality has also faced a decline. It has been recorded that continental has poor on-time performance, despite its efforts. It also had the worst record in over booking and bumping passengers in comparison to other airlines. Lack of internal training for the employees Little equity in planes, limiting ability to raise cash through sale/lease-back dealsMinimal presence in major foreign destinations such as London, Paris, Tokyo

Internal Factor Evaluation (IFE) Matrix

STRENGTHS WEIGHTRATINGTOTAL WEIGHTED SCORE

The fact that the airline provides customized services in accordance to the destination its travelling to. 0.1040.40

The company rose to profitability after being hit by severe losses for four years straight. 0.0830.24

Its young management team that has been supporting it since the mid 90s.0.0520.10

Its various incentive programs to keep its staff motivated to aim towards on-time arrivals.0.0730.21

The fact that it serves more international markets than any other U.S. aircraft.0.0840.32

Houston hub serves booming energy market; Newark hub serves huge New York market and is a major access point to Europe0.0730.21

Its fleet comprises of mainly Boeings and is one of the youngest globally. This leads to increased efficiencies and major cost reductions.0.0730.21

Received an array of awards for service quality and overall reputation.0.0930.27

Increment in gross profits and reductions in overall costs. 0.0520.10

WEAKNESSES

The fact that its Go forward plan does not attend the environmental issues directly.0.0730.21

The airline has faced a decrement in its overall AQR scores.

0.0320.06

Service quality has also faced a decline.

0.0530.15

It has been recorded that continental has poor on-time performance, despite its efforts.0.0320.06

It also had the worst record in over booking and bumping passengers in comparison to other airlines.

0.0420.08

Lack of internal training for the employees0.0320.06

Little equity in planes, limiting ability to raise cash through sale/lease-back deals0.0630.18

Minimal presence in major foreign destinations such as London, Paris, Tokyo0.0320.06

Total12.92

Interpretation:After evaluating and analyzing the weights of strengths and weakness of the company, the total weighted score is 2.92 which slightly higher above the average score 2.50 and it clearly indicates that Continental Airlines has a well-built internal strengths and minimal weaknesses. However there needs to be significant improvements in their internal operational structure in order to achieve competency.Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix

A scan of internal and external environment is important part of the strategic planning process. The companys internal strengths and weakness are related to external opportunities and threats. The analysis provides information that is helpful in matching the firms resources and capabilities to the competitive environment which operates.StrengthWeakness

1. The fact that the airline provides customized services in accordance to the destination its travelling to. 2. The company rose to profitability after being hit by severe losses for four years straight. 3. Its young management team that has been supporting it since the mid 90s.4. Its various incentive programs to keep its staff motivated to aim towards on-time arrivals.5. The fact that it serves more international markets than any other U.S. aircraft6. Houston hub serves booming energy market; Newark hub serves huge New York market and is a major access point to Europe7. Its fleet comprises of mainly Boeings and is one of the youngest globally. This leads to increased efficiencies and major cost reductions.8. Received an array of awards for service quality and overall reputation9. Increment in gross profits and reductions in overall costs1. The fact that its Go forward plan does not attend the environmental issues directly.2. The airline has faced a decrement in its overall AQR scores. 3. Service quality has also faced a decline.4. It has been recorded that continental has poor on-time performance, despite its efforts.5. It also had the worst record in over booking and bumping passengers in comparison to other airlines.6. Lack of internal training for the employees7. Little equity in planes, limiting ability to raise cash through sale/lease-back deals8. Minimal presence in major foreign destinations such as London, Paris, Tokyo

OpportunitiesThreats

1. Continental airlines should consider researching the international markets, as they face intense competition from the local market. 2. The installation of winglets in an attempt to lessen costs.3. The EU-US Open Skies provides Continental with an opportunity to broaden its base in terms of connectivity.4. Merger with the United Airlines in October 20105. Growing demand for travel at 3.2% growth in 20116. Being more technologically advanced and using the internet to reduce their costs.7. 42% increase in the Hispanic population in US over the last decade

1. Rise in fuel costs and domestic competition.2. Elevation in security costs due to the risks of hijacking and terrorism.3. The fact that its rivals have recovered from bankruptcy and recovered back much stronger due to their ability to reduce their costs.4. The introduction of new aircrafts by the rivals and the fact that this would directly contradict Continentals young and more fuel efficient aircrafts. 5. Entry of international airlines into the domestic services6. Ongoing pricing competition of budgeted airlines in the market7. Airline industry as a whole is vulnerable to economic cycles and big swings in bottom-line performance

SWOT Matrix

Stren Strengths

1. The fact that the airline provides customized services in accordance to the destination its travelling to. 2. The company rose to profitability after being hit by severe losses for four years straight. 3. Its young management team that has been supporting it since the mid 90s.4. Its various incentive programs to keep its staff motivated to aim towards on-time arrivals.5. The fact that it serves more international markets than any other U.S. aircraft6. Houston hub serves booming energy market; Newark hub serves huge New York market and is a major access point to Europe7. Its fleet comprises of mainly Boeings and is one of the youngest globally. This leads to increased efficiencies and major cost reductions.8. Received an array of awards for service quality and overall reputation9. Increment in gross profits and reductions in overall costs Weaknesses

1. The fact that its Go forward plan does not attend the environmental issues directly.2. The airline has faced a decrement in its overall AQR scores. 3. Service quality has also faced a decline.4. It has been recorded that continental has poor on-time performance, despite its efforts.5. It also had the worst record in over booking and bumping passengers in comparison to other airlines.6. Lack of internal training for the employees7. Little equity in planes, limiting ability to raise cash through sale/lease-back deals8. Minimal presence in major foreign destinations such as London, Paris, Tokyo

OpportunitiesSO StrategyST Strategy

1. Continental airlines should consider researching the international markets, as they face intense competition from the local market. 2. The installation of winglets in an attempt to lessen costs.3. The EU-US Open Skies provides Continental with an opportunity to broaden its base in terms of connectivity.4. Merger with the United Airlines in October 20105. Growing demand for travel at 3.2% growth in 20116. Being more technologically advanced and using the internet to reduce their costs.7. 42% increase in the Hispanic population in US over the last decade

ThreatsWT StrategyWO Strategy

1. Rise in fuel costs and domestic competition.2. Elevation in security costs due to the risks of hijacking and terrorism.3. The fact that its rivals have recovered from bankruptcy and recovered back much stronger due to their ability to reduce their costs.4. The introduction of new aircrafts by the rivals and the fact that this would directly contradict Continentals young and more fuel efficient aircrafts. 5. Entry of international airlines into the domestic services6. Ongoing pricing competition of budgeted airlines in the market7. Airline industry as a whole is vulnerable to economic cycles and big swings in bottom-line performance

1) Its fleet comprises of mainly Boeings and is one of the youngest globally. This leads to increased efficiencies and major cost reductions/ the installation of winglets in an attempt to lessen costs. (S7:02): Product Development.2) The fact that the airline provides customized services in accordance to the destination its travelling to/ Being more technologically advanced and using the internet to reduce their costs. (S1:O6): Market Penetration.3) Backward Integration: S3:S4:O3

1) It has been recorded that continental has poor on-time performance, despite its efforts/ It also had the worst record in over booking and bumping passengers in comparison to other airlines/ Lack of internal training for the employees/ Continental airlines should consider researching the international markets, as they face intense competition from the local market / Growing demand for travel at 3.2% growth in 2011

1) Its fleet comprises of mainly Boeings and is one of the youngest globally. This leads to increased efficiencies and major cost reductions/ The introduction of new aircrafts by the rivals and the fact that this would directly contradict Continentals young and more fuel efficient aircrafts. (S7:T4): Product Development.2) Received an array of awards for service quality and overall reputation/ Airline industry as a whole is vulnerable to economic cycles and big swings in bottom-line performance. (S8:T7): Market Penetration.

1) It also had the worst record in over booking and bumping passengers in comparison to other airlines/ Airline industry as a whole is vulnerable to economic cycles and big swings in bottom-line performance/ Rise in fuel costs and domestic competition. (W5:T7:T1): Retrenchment.2) Minimal presence in major foreign destinations such as London, Paris, Tokyo/ The fact that its rivals have recovered from bankruptcy and recovered back much stronger due to their ability to reduce their costs.(W8:T3): Horizontal Integration.

SWOT MATRIX ANALYSISSO Strategy:

The fact that that Continentals product portfolio consists mainly of Boeings and are the youngest worldwide coupled with the fact that Continental airlines has introduced the installation of winglets to cut costs will lead to an overall efficient product development. (s7:02)The customized service element that Continental provides, in accordance with the destination its travelling to mixed with the fact that technological advancements now make it easier to provide these customized services would make it easier for Continental to penetrate into the market. Continentals efforts to motivate its employees by providing them with efficient incentive programs, plus the fact that it Open Skies policy that was developed to raise connectivity with Continentals allies helps Continental achieve backward integration. ST Strategy:

The introduction of new aircrafts by Continentals competitors would lead Continental airlines to focus primarily on developing new products, as its Boeings may become obsolete. As mentioned, the airline industry as a whole is very vulnerable in nature and tends to fluctuate in terms of its operations. However, since Continental Airlines has been awarded with various service quality awards, it would enable them to penetrate the markets much easily. WO Strategies:

It has been stated as one of the flaws of Continentals Airlines that it has poor on-time performance, also has problems with booking passengers in comparison with other airlines. Its training provided to its staff has also been recorded as being weak, hence, if Continental Airlines were to target a new market altogether and focus primarily on providing its services to this new market they might actually be able to better their standards and service quality. This is where the strategies of Market development, Product Development and Market Penetration come into play. WT Strategies:

Continental Airlines is faced with a retrenchment possibility when we take into accounts the various weaknesses and threats. These are highlighted in the SWOT matrix above.It may also have the potential of integrating horizontally as its competitors have recovered from the financial slump, so in order to meet the rise in competition it may need to take into account the possibility of adhering by this strategy.

Strategic Position and Action Evaluation (SPACE) Matrix

The strategic Position and Action Evaluation (SPACE) Matrix is one of the significant techniques to recognize the type of strategy company has to choose. The matrix consists of four different areas with a specific strategy in each. The axis of the SPACE matrix represent two internal dimensions (functional strength and competitive advantage) and two external (environmental stability and industry strength) which are important in order to identify companys overall strategic position. FS

CONSERVATIVE AGGRESSIVE54321

COMPETITVEDEFENSIVE

Calculated valuesAverage value for FS=3.83, CA=-2, IS=3, ES=-3.63Point on X-AXIS = (-2+3) = 1Point on Y-AXIS (3.83-3.63) = 0.20

1 2 3 4 5 -5 -4 -3 -2 -1 ES

-1-2-3-4-5 IS CA

Financial Strength (FS)Environmental Sustainability (ES)

Return on Investment4Technological Changes-4

Leverage3Inflation rate-4

Liquidity3Demand fluctuation-3

Working Capital5Price bracket of competing products-2

Cash Flow4Entry barriers into the market-4

Inventory Turnover4Pressure from competition-3

Total23Easy exit from the market-3

Competitive Advantage (CA)Price elasticity of demand-4

Market Share-1Risk involved in Business-2

Product Quality-1Total-29

Product Life Cycle-1Industry Strength (IS)

Customer Loyalty-2Growth possibility5

Competitions capacity utilization-3Financial constancy2

Technological skills-3Technological knowledge2

Control over distributors and suppliers-3Resource consumption3

Total-14Ease of entry into the market2

Productivity, capacity, utilization4

Total18

Interpretation:Continental Airline falls on the second quadrant of SPACE matrix, which is aggressive. In overall the matrix shows that the company has competitive advantage if they adapt aggressive strategies such as any integration and intensive or diversification.

Boston Consulting Group (BCG) MatrixThe BCG matrix reveals the companys market share position in the industry to the market share detained by the largest competitor in the same industry. The matrix displays the companies on a graph of the market growth vs. market share relative to competitors. The BCG Matrix is divided into four types of circumstances, the Stars, Cash Cows, Dogs and Question Marks.Relative Market ShareContinental sales in 2009=12,586mnDelta Airlines sales in 2009=28,063mnThe relative market share is 0.45Industry growth rate= (15.5) %Major AirlinesRevenue 2009 in millionsRevenue 2008 in millionsAverage Growth Rate %

Continental Airlines12,586.015,241.0(17)%

American Airlines19,917.023,766.0(16)%

Delta Airlines28,063.022,697.0(23)%

Southwest Airlines10,350.011,023.0(6)%

Total(62)/4=(15.5)%

Interpretation:The following BCG Matrix shows the proportion between relative market share and industry growth rate of Continental Airlines. With a relative market share of 0.45 and a industry growth rate of (15.5) % the position lies in the fourth cell Dogs which represents the strategies of liquidity, divesture and retrenchment. The company has very Low relative market share & compete in slow or no market growth with Weak internal & external position.

High Medium Low Relative Market Share

1.0 0.500.0 High +20

STARS

QUESTION MARKS

CASH COWS

DOGS

Internal-External (IE) MatrixIndustry Growth Rate% Medium 0Low -20

The Internal-External (IE) Matrix is a strategic management contrivance that is used to analyze the strategic position of a business. The IE matrix is supported by the total weighted scores of the IFE matrix on the x-axis and the EFE matrix on the y-axis. The matrix spots an organization into nine cells and the matrix can be divided into three major sections that have dissimilar allusion. The IE matrix is almost similar to BCG matrix and it has two key dimensions including the scores in the x axis and EFE total weighted scores on the y axis. Total IFE weighted score of 2.92 falls in X axis and the Total EFE weighted score of 2.83 fall in the Y axis and both the whereas both the values are slightly above average. According to the IE matrix below, Continental Airlines falls in the fifth cell and so as they should follow the strategy of hold and maintain. This strategy mainly focuses on both market penetration and product development.THE IFE TOTAL WEIGHTED SCORES

I

II

III

IV

V

VI

VII

VIII

IX

Strong Average Weak 3.0 to 4.0 2.0 to 2.99 1.0 to 1.99THE EFE TOTAL WEIGHTED SCORES1.0 2.0 3.0

4.0

1.0 2.0 3.0

Grand Strategy MatrixThe GS matrix is one of the popular tools to identify and formulate alternative strategies and companies can be positioned in one of the four quadrants which represent different strategies. The following grand strategy matrix of Continental airlines evaluates competitive position and market growth in the current similar market industry.Rapid Market Growth

II

Weak Competitive Position

IStrong Competitive Position

III

IV

Slow Market GrowthInterpretation:According to the Grand Strategy Matrix, the position of Continental Airlines lies in the fourth quadrant which reveals that the company has above the average competitive position among the competitive market and but very slow market growth as the industry growth rate is really below the average. The strategies recommended are related diversification, unrelated diversification and joint ventures.

Quantitative Strategy Planning Matrix (QSPM)ALTERNATIVE STRATEGIES(HI)Merging with United Airlines

(MD)Developing a strong market in China and Japan

STRENGTHSWEIGHTASTASASTAS

The fact that the airline provides customized services in accordance to the destination its travelling to. 0.102

0.2030.30

The company rose to profitability after being hit by severe losses for four years straight. 0.0830.2420.16

Its young management team that has been supporting it since the mid 90s.0.0520.1010.05

Its various incentive programs to keep its staff motivated to aim towards on-time arrivals.0.07----

The fact that it serves more international markets than any other U.S. aircraft.0.0820.1630.24

Houston hub serves booming energy market; Newark hub serves huge New York market and is a major access point to Europe0.0730.2110.07

Its fleet comprises of mainly Boeings and is one of the youngest globally. This leads to increased efficiencies and major cost reductions.0.0730.2120.14

Received an array of awards for service quality and overall reputation.0.0920.1830.27

Increment in gross profits and reductions in overall costs. 0.05----

WEAKNESSES

The fact that its Go forward plan does not attend the environmental issues directly.0.07----

The airline has faced a decrement in its overall AQR scores.

0.0310.0320.06

WEIGHTASTASASTAS

Service quality has also faced a decline.

0.0530.1520.10

It has been recorded that continental has poor on-time performance, despite its efforts.0.0320.0610.03

It also had the worst record in over booking and bumping passengers in comparison to other airlines.

0.0420.0810.04

Lack of internal training for the employees0.03----

Little equity in planes, limiting ability to raise cash through sale/lease-back deals0.0620.1210.06

Minimal presence in major foreign destinations such as London, Paris, Tokyo0.0330.0910.03

Total1

OPPORTUNITIES

Continental airlines should consider researching the international markets, as they face intense competition from the local market. 0.07----

The installation of winglets in an attempt to lessen costs.0.10----

The EU-US Open Skies provides Continental with an opportunity to broaden its base in terms of connectivity.0.0920.1830.27

Merger with the United Airlines in October 20100.1040.4020.20

Growing demand for travel at 3.2% growth in 20110.0440.1630.12

Being more technologically advanced and using the internet to reduce their costs.0.0820.1610.08

42% increase in the Hispanic population in US over the last decade0.0330.0910.03

THREATS

WEIGHTASTASASTAS

Rise in fuel costs and domestic competition.0.09----

Elevation in security costs due to the risks of hijacking and terrorism.0.08----

The fact that its rivals have recovered from bankruptcy and recovered back much stronger due to their ability to reduce their costs.0.0620.1230.18

The introduction of new aircrafts by the rivals and the fact that this would directly contradict Continentals young and more fuel efficient aircrafts. 0.0720.1430.21

Entry of international airlines into the domestic services0.0830.2410.08

Ongoing pricing competition of budgeted airlines in the market0.0820.1610.08

Airline industry as a whole is vulnerable to economic cycles and big swings in bottom-line performance0.03----

TOTAL13.392.8

Advantages and Disadvantages of StrategiesMerging with United Airlines:An advantage of this merger would be the fact that mergers do not require immediate cash. Also, a merger may allow the shareholders of smaller enterprises to own a certain share of a much larger entity, thus increasing their overall net worth. In addition, a merger may also allow Continental airlines to avoid many of the costly and time constraining elements associated with asset purchases. Disadvantages of the possible Merge wouldve been those of diseconomies of scale, which generally occur when a business becomes too large for the owners to handle, thus giving rise to higher unit costs. Also, the clash of culture, such as those of the organization, the individuals and management as a whole, can occur. This may in turn reduce the overall effectiveness of the organization. Lastly, a contradiction of objectives may occur which may lead the business to face severe consequences.

Developing a strong market in Japan and China:The obvious advantages of this, for Continental Airlines, would be that since Japan and China have faced an increment in their rate of tourism, developing a strong market base in these regions would enable Continental Airlines to increase their market share, gain further global recognition, increase their productivity and profitability and thus face an overall rise in their efficiency. However, certain problem may also arise in targeting these markets. Researching and developing strategies that fit these regions may take time and money, and thus, the problem of opportunity cost may arise. Also, a lot of resources may be wasted if policies do not match the expected outcomes; this may be completely disadvantageous for the business and may also lead it to bankruptcy. Strategy recommendationFrom the careful analysis of the strengths and weaknesses of both these strategies, it can be seen that merging with United Airlines was a better option for Continental Airlines. This was mainly because through this merger, Continental Airlines faced higher economies of scale, economies of scope and an increment in their overall market power. Lastly, they may also have also incurred a reduction in their long term costs as costs were distributed and tasks were also spread across their much greater operations base. Long term objectives

The Long term objectives of the company is to Increase operating revenue by 20 % by 2012 using Horizontal Integration strategy (Merging) in this scenario and the company expects a significant growth in the future operation by extending its wide network of global and domestic links. Strong marketing activities will be done in order to support the long term objective and the goal of the company; the financial statements are expected to be beginning by the end of 2010 and the objective is believed to be achieved in two years which is 2012. The following chart will give a glimpse about the annual objectives of the companys different departments.

Objectives and Policies

PoliciesResearch and Development: Develope new technology to reduce the fuel consumptionThe R&D Team should develop a model of technology practice by the end of this year in which the company should be able to implement in the future. Invent new ways of Online reservation and flight tracking systemThe demand for online reservation and mobile flight tracking system is increasing and by the period of 5 months, company should be able to deliver these communicative systems in the responsive market.Marketing: Prioritize advertising activities for merging and developing campaign programs for the new routes Marketing team has to develop new marketing plan within 3 months about the new routes and by the year end a new way of online marketing system should be added onto the company website.Management Information Systems: Create a consolidated customer data base of both merged airlinesDevelop a combined data base of existing customers and upload into the server system by end of OctoberFinance: Forecast the future risks involved in the horizontal integration process and develop risk managementFinance Management team should assess the various risks associated with the merging and should develop a risk management program within 3 weeks of time starting by the beginning of MarchPersonnel: Implement staff training and development program for new recruitments and offer refreshment training every quarter Human resources team should develop a new training and welcoming program for all the new recruited staff before the recruitment process starts.Develop and offer new refreshment training for all the employees in quarterly basis.Resource Allocation

The following table will shed some lights on the resources which will be allocated before the implication of the recommended strategy. The financial resources will be required for airport charges, government taxes, legislation fees, marketing activities and operational expenses. The HR resources such as new recruitment and training programs will be required as well. Physical and technological resources are the basic operational resources required for the strategy to be implemented successfully.FinancialmortgageCapitalRetained Profits & earningsInvestmentsPhysicalAircraftsMaintenance & Service centresCorporate offices & BuildingsEmployee housingsEquipments & other assets

HumanRecruitment and training of employeesTechnologicalR&D development equipmentsOutsourcing of technology

Income Statement after Implementation Dec 09(mn) Dec 11(mn) Revenue12,586.013,959.0

Cost of Goods Sold5,779.07,745.0

Gross Profit6,807.06,214.0

Gross Profit Margin54.1%44.5%

SG&A Expense6,314.07232.0

Depreciation & Amortization494.0390.0

Operating Income(146.0)(628.0)

Operating Margin-1.2%

Non operating Income95.0132.0

Non operating Expenses(388.0)37.0

Income Before Taxes(439.0)(214.0)

Income Taxes(157.0)(97.0)

Net Income After Taxes(282.0)23.0

Continuing Operations(282.0)23.0

Discontinued Operations---

Total Operations(282.0)23.0

Total Net Income(282.0)23.0

Net Profit Margin-2.2%1.8

Recommendations:The overall strategic analysis of Continental airlines reveals that current recommendation for the horizontal integration strategy which in merging in this case would boost the sales over the years and the company can have a significant control over the entire air transport operations in the domestic airline market of United States as well as in the international airline operation as well. The expected growth of company will definitely become a threat for many of the domestic air carriers in the United States and it will increase the overall market share of the company in the coming years.