United Airlines United Continental Does Not Have Essay

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United Airlines

United Continental does not have a mission statement or a vision statement, either on its website or in its annual report (10-K). Cochran, David and Gibson (2008) argue that the mission statement is a critical first step in the strategic management process. It sets the framework for what the firm's strategies are supposed to accomplish, especially in conjunction with the vision statement. When a company lacks these things, it can lack strategic focus. Elements of the strategy can lack coherence, and be a poor fit with one another. A mission statement is also the most visible and public element of the strategic plan, so without it the company is not communicating its plan to the public. Nor is the mission communicated to employees, when there is not one.

A mission or vision statement can be simple and vague, but provide a sense of direction. It can also be very specific (BRS, 2012). In the latter case, the company may already have a general sense of what it is and what it wants to be. This might be the case with United Continental. The company operates only in one business, and probably has a fairly good sense of what it wants to do within that business. Thus, management may feel that the mission and vision are implicit, and therefore to state them explicitly is somewhat pointless. That is not the case, however. Considering the U.S. airline industry, there are a number of similar competitors and at some point United Continental needs to define what makes it special, and the mission statement can convey this for both the internal and external audience.

Mission and vision statements are especially valuable for companies like this that have just undergone a major merger. Employees and customers of both companies (United and Continental) will benefit from having the sense of unified mission and guidance that comes from having new mission and vision statements that define the combined entity, and highlight the vision that senior management has that drove the merger in the first place.

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Without these statements, the new combined United Continental seems a bit rudderless, and it is hard to get a sense of what the company wants to accomplish. It is not implicit at all when put into the perspective of a highly competitive industry, so senior management is making a mistake by not developing a mission or a vision statement for this company.

External Analysis

The airline industry in the United States is highly competitive. Firms in the industry have limited power over buyers as a result, because switching costs are low, consumers are price sensitive and there is little product differentiation. Firms have low power over suppliers as well. The biggest costs for United Continental are labor and fuel (2010 Form 10-K). Labor costs are governed in part through negotiations with the unions, and the company has struggled in the past to manage the pensions especially. Fuel costs are governed by global supply and demand conditions, and account for between 27-39% of United Continental's costs (Form 10-K). Fuel costs are highly volatile, and while the company undertakes some hedging, it still has very little ability to control fuel prices. Its volume helps it to gain at least a little bit of leverage with aircraft suppliers.

There is a high threat of substitution on many routes, as flights compete with automobiles, public transportation, and some corporate buyers especially substitute electronic communications for face-to-face meetings in order to save costs. There is a moderate threat of new entrants. Despite high capital costs, new airlines start frequently and some of them manage to survive and become strong competition for established firms in the industry. The intensity….....

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