There was certainty among respondents that Asian network airlines must more greatly leverage their resources as their external environment changes. Indeed, Nicodemus Lampe of Garuda Indonesia said: “In our experience, internal resources should totally support the strategy and tactics taken to accommodate external developments.” Literature established that any changes to the external environment will require changes to the internal environment, so realigning and improving strategic fit. Hence, Teece et al. (1997) showed
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that a firm’s ability to adapt, renew, reconfigure, and recreate its resources and competencies to achieve a better equilibrium with its external environment, during periods of much competition, is crucial, while Eisenhardt and Martin (2000) indicate that this should help to achieve competitive advantage during fast and unpredictable change and when the competitive landscape changes.
However, it was found during the interviews that whether resources do or do not support the strategy is partly based upon the specific development and whether or not that change is potentially beneficial to them or a hindrance. Air India said:
“It’s difficult to say. If our external environment changes, some aspects of that could well be in our favour. For example, the policy regime now permits FDI by foreign carriers in Indian airlines. But that policy excludes Air India. So maybe if that restriction was removed, and if the world is moving towards a regime where big is better and where ‘mega carriers’ dominate, then we may not need to adapt much internally. But we will need to rethink everything, including our internal side, if the Jet-Etihad partnership goes through as it may change the game for us.”
Despite the differing situations of when greater reliance on resources may be applicable, it was agreed that it is natural for resources to be adapted, updated, strengthened, or changed. This is particularly the case from an external development that may be negative for a firm. Interviewees found that a competitive response, of whatever form, will inevitably require some change to resources. Garuda Indonesia said that if this isn’t done “you’d be killed. You have to play with them, update them, change them, reinforce them.” Hofer and Schendel (1978) found that sustainable competitive advantage depends upon the equilibrium between a firm’s resources and capabilities and the changing circumstances of its external environment. Indeed, without a change of some form to resources, Hamel and Prahalad (1994) identified that current strategy may become obsolete and unable to withstand competitive pressure, so a reduction in firm performance.
The interviewees agreed that changes to resources typically concern leveraging human resources, a workforce and managers, for it is these which make the difference and which undertake the work. Jet Airways said:
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“We have to better rely on our resources. We have no one else to leverage. Our staff, our human resources, they’re the best resources we have. These folks… we have a very diverse expatriate population at management levels. A lot of them have worked in other carriers, some of them come from other industries.”
In terms of human resources, it was found that incentivising, training, and further developing intra-firm relationships were the most significant. While Higgs and Renton (2003) showed that effective communication, a spirit of healthy competition, belief in the product, its price, and reward level appeared to be the key drivers of success, they found that incentives may increase sales but at the expense of teamwork and motivation. The interviewees found that incentives, training, and intra-firm relationships may not necessarily be straightforward, for in Asia as elsewhere politics may impede it and stop it. Philippine Airlines said:
“In sales, for example, we’re trying to incentivise our staff more and reward them for greater performance. Otherwise they’ll keep saying ‘you know what, you don’t care’. You compensate them according to performance. They should actually then help to increase our overall revenues.”
Training was found to be crucial, for it is this which helps to refine and to further strengthen techniques to respond appropriately to the external developments. A better-trained and knowledgeable workforce may act as a point of advantage among firms. Jet Airways said:
“Training, training, training. Training’s one aspect we’ve often overlooked. In airlines, you normally want to save on cost and they first target training and also advertising. This isn’t good. They’re too important. You should invest more in them.”
Training of whatever form was found to better enable stronger responses to external developments, but this will clearly not be instantaneous. In particular, it would help to leverage sales; the ability and awareness of opportunities in served and potential new markets; to promote their brands in a more effective manner; and to better manage costs.
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Most interviewees believed that the leveraging and development of relationships is crucial and underpins most other actions. It should be progressed irrespective of whether the external developments are positive or negative. Malaysia Airlines said:
“No matter how many management books you read, it’s all about relationships. Relationships… drive a lot of businesses and a lot of things that happen in this part of the world. It is all relationship-driven. So maintaining and improving external stakeholder management becomes crucial and requires integrity on our part. If we see a company that promises but never delivers… people will think, ‘this isn’t right’. That relationship is then burnt.”
Of all intangible resources, customer relationships (Gouthier and Schmid, 2003), organisational culture, and human capital have all been found to have an impact on firm performance (Michalisin et al., 1999; Hitt et al., 2001).
6.9 If your external environment altered and your resources didn’t adapt, what do