Introduction to Decision Making

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. • Follow the assignment instructions closely and follow all steps listed in the instructions • Stay focused on the precise assignment questions, don't go off on tangents or devote a lot of space to summarizing general background materials • Make sure to cite readings from the background materials page. Rely primarily on the required background readings as your sources of information Include both a bibliography and in-text citations. Citation and reference style instructions are available at Trident University's Introduction to APA.

Sample Solution

Task: Analyze Qantas' decision to sell its frequent flyer program using the concepts of intuitive and rational decision-making.

Key Points:

Qantas faces financial difficulties due to rising fuel costs and a slow economy.
The frequent flyer program is Qantas' most valuable asset, but selling it could have long-term consequences.
The decision is complex and requires a careful analysis of potential outcomes.

Full Answer Section

Background Materials:

Buhler (2001) and Kourdi (2011) on intuitive vs. rational decision-making.
Articles on Qantas' financial situation and the frequent flyer program.

Research and Analysis

1. Strategic or Operational Decision? Programmed or Non-Programmed?

The decision to sell Qantas' frequent flyer program is undoubtedly strategic. It involves a high-level commitment of resources and is likely to determine the company's future direction. As such, it is a non-programmed decision. There is no established procedure or routine for this type of decision, as it is unique and complex.

According to Buhler (2001), strategic decisions are characterized by their long-term impact and the level of uncertainty involved. Selling the frequent flyer program would significantly affect Qantas' financial position and customer loyalty, making it a high-stakes decision with uncertain outcomes.

2. A Rational Approach to the Decision

If Alan Joyce chooses a rational approach to the decision, he should follow a systematic process. This could involve the following steps:

Define the problem: Clearly articulate the financial challenges Qantas faces and the potential benefits and drawbacks of selling the frequent flyer program.
Gather information: Conduct a thorough analysis of the program's financial value, customer base, and competitive landscape. Evaluate potential buyers and the terms of a sale.
Develop alternatives: Consider various options, such as selling the program outright, forming a joint venture, or maintaining ownership while exploring partnerships.
Evaluate alternatives: Analyze the potential costs, benefits, risks, and uncertainties associated with each alternative. Use financial modeling to assess the impact on Qantas' financial performance.
Select the best alternative: Choose the option that maximizes expected value while minimizing risk.
Implement the decision: Develop a detailed implementation plan, including communication strategies and change management initiatives.
Evaluate the decision: Monitor the outcomes of the decision and make adjustments as needed.

Kourdi (2011) emphasizes the importance of careful analysis and consideration of alternatives in rational decision-making. By following these steps, Joyce can increase the likelihood of making an informed and effective decision.

3. Rational vs. Intuitive Approach

Given Joyce's experience as an airline executive, a combination of rational and intuitive approaches might be most effective. His intuition can provide insights into the potential consequences of different options, while rational analysis can help to structure the decision-making process and reduce uncertainty.

However, for a new CEO without airline experience, a more rational approach may be preferable. This would allow them to systematically gather information and assess the situation before making a decision. As their experience grows, they can gradually incorporate intuition into their decision-making style.

Buhler (2001) suggests that intuition can be valuable in complex situations, but it should be complemented by careful analysis. Kourdi (2011) emphasizes the importance of both cognitive and affective factors in decision-making.

Conclusion

The decision to sell Qantas' frequent flyer program is a complex strategic challenge with far-reaching implications. A combination of rational and intuitive approaches can help Joyce navigate this decision, but the specific approach may vary depending on the CEO's experience and the available information.

Note: To provide a more comprehensive and in-depth analysis, it is essential to thoroughly review the provided articles and the background materials on intuitive and rational decision-making. By carefully examining the specific arguments and evidence presented in these sources, you can strengthen your analysis and support your conclusions.

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