Summary of Scenario
Pakistan International Airlines (PIA) is the national flag carrier of Pakistan. Its primary hub is Karachi. Lahore and Islamabad serve as secondary hubs. It was founded as Orient Airways in 1946 and nationalized in 1955. It employs about 14,000 people. It has operations nationwide and internationally. PIA has flights to almost all of major airports around the world. PIA is majorly owned by the Government of Pakistan (87%) while the rest of it is owned by (13%) by private shareholders. PIA also has code sharing agreements with four other international carriers. In the recent years, PIA has suffered from financial decline. Its administration has been charged with corruption allegations and ethical issues.
A common ethical dilemma, faced by many businesses, (same with PIA too) is related to the pricing of their products. If they strive to improve the quality, it can drive the prices high to ensure the sustainable profit. Many renowned brands, known for their excellent product quality, have been termed as unethical because of their cost prohibitive products. It is assumed that this pricing is unfair to the low income population as it can only be bought by the elite class. There have been cases when many companies even faced mass protests by the consumers and had to shut down their businesses in some countries. At the same time, if the company decides to lower the price of the product, it is bound to affect the quality in one way or another. Finding an appropriate quality and cost balance can be tricky, and will vary from place to place.
The key stakeholders in this situation are the PIA administration and the customers. The PIA administration has to answer the concerns of the customers and keep its reputation clean.
“The question arises, what is the optimal balance in quality and quantity of the service? What steps the organisation should take to avoid the destructive spiral?”
Pricing of the product is the ethical issue faced by PIA, as they focus on improving the quality of their products which results in the high prices of the products and services provided by them. High pricing of the products is not fair for the low income populations, because these prices of the products can only be afforded by the rich customers. In similar manner, in case organization decide to reduce the price of the product then it cause negative affect on the quality of the product and result in loss of customer base. Therefore, it is important for the organization to strike the right balance between the quality and quantity of the products.
Description of Theory
This paper strike the way through balance can be achieved between the quality and quantity of the products, and steps which can be taken by the organization for avoiding the destructive spiral.
This section of the report discusses the stakeholder theory in context of the above stated ethical issue faced by the organization. This theory mainly focuses on the promotion of the practical, effective, and ethical way for the purpose of managing the organization in this complex environment (Freeman, Harrison,Wicks, Parmar & Decolls, 2010).
This theory is considered as the practical theory, because it imposes obligations on the organization to consider the interest of all the stakeholders of the organization, and not only of the shareholders of the organization. This theory is very important for the organization because if all the stakeholders of the organization are treated well then they definitely show their loyalty and positive attitude towards the organization. Positive attitude and loyalty of the shareholders ultimately result in growth and profitability for the organization such as they share valuable information with the organization, purchase more products and services, provide tax breaks and other type of incentives, work hard and with full dedication for the company, etc (Freeman & Harrison, 2015).
It is necessary for the PIA to consider the interest of the customers and PIA administration before taking any decision in context of the pricing of the products. In case they increase the price of the products then it will definitely affect the on customers of the organization, and this cause negative impact on the performance of the organization. Similar thing happen if organization reduce the quality of the product. Therefore it is important for the organization to focus on the achieving the optimal balance between the two. It is necessary for the PIA to adopt the approach of stakeholder theory in the organization, because this theory effectively harnesses the energy of the organization’s stakeholders towards the fulfilment of organizational goal (Cragg, 2002).
For the purpose of managing the stakeholders of the organization in effective manner, organization must conduct the stakeholder analysis. Evaluation of stakeholder’s interest is now more important because of the interconnected nature of the world. In present business environment, shareholders are not only the key stakeholders of the organization, but all stakeholders such as employees, consumers, community, society, etc. play important role in the growth of the organization. Interest of the customers is the primary focus area of the organization, because if customers are not satisfied then it is not possible for the organization to survive in the long run (Bryson, 2004).
Analysis
Customer satisfaction is the most important approach which play important role in the growth ad survival of the business. In present world, customers are considered as the most important stakeholders for the organization, as those organizations which hold strong customer base can ensure long term survival and profitability for the organization.
Customer satisfaction is the approach which can only be possible with achieving the optimal balance between the quality and quantity of the products. Balance between the quality and quantity of the service ultimately leads to the customer happiness and satisfaction which provide long term benefits to the organization.
High pricing of the services is not only the organizational issue, but it is also the ethical issue, because it directly affects the customers using that service. High pricing is considered as unfair because of the number of reasons as it result in the inequality in the society and reserve the services only for the elite class customers. Some of the unethical pricing strategies (Springs, n.d.) are fair pricing,
Generally, customers prefer quality services at the reasonable prices in the complete cycle of the sales such as pre-purchase validation, the purchase process, and also in the after sales support. Quality at reasonable price is the important component for each and every business, especially in the service industry. There are number of methods which can be adopted by the organization for the purpose of measuring the satisfaction level of the customers, and maintaining the optimum balance between the quantity and quality of the services.
This balance can be achieved only by ensuring the effective and efficient working at the back office and by making some important internal changes in the organization. The burden of this approach mainly relies on the PIA administration, as they are liable to reply the queries of the customers and maintain the optimal balance between the two. Once management focus on their back office, they can initiate to measure the effectiveness and non-effectiveness of the important components such as total utilization of employees, task completion rates, and quality of the work, collection of the relevant data, and evaluating the results. All these evaluation help the management in identifying the issues, and frame strategies to resolve these issues (Atiyah, 2016).
Organization can offer quality products to their customers, by not compromising with the quantity of the services they provide to their customers. In this context, organizations need to develop the low – cost strategies. These strategies mainly focus on reducing the cost of the product or service by maintaining the quality of the organization. This can be done by offering the low pricing in terms of the pricing strategy, for the purpose of gaining the market share and raising the demand of the service in the market.
PIA can use the generic strategies for maintain the balance between the two such as differentiation strategy and focus strategy. Both the strategies help the organization in gaining the competitive advantage over their customers and help them in achieving the economies of scale.
This issue can be resolved with the help of the value-based leadership in the organization. Value-based leadership might be conceptualized as the practice which mainly focuses on encouraging the cogent values in the consideration of the personal interest and also I degree of power hold by the in organization. This leadership mainly depend on the understanding that imposed values and social power can play important role in the promotion of some particular values. Therefore, those leaders who only think about the fulfilment of the mission statement have completed only half of their work (Shatalebi & yarmohammadian, 2014).
The model of the value-based leadership is derived from the issues between the values, interests, and power (VIP). This model deals with the issues occurred between the citizens, workers, and leaders (CWL). This model of leadership is mainly based on the increasing areas of similarity. Firstly, leaders make efforts to design the concordance in their personal VIP, and after this they spread this process in the complete organization and expect from the workers to do the same. Next step in this context includes the extension of areas of similarity in the CWL. Leaders are under obligation to create the partnership among these three important stakeholders of the organization for the purpose of achieving the concordance of the values and goals. The most important task for the leaders while creating the partnership is the creation of the trust (Prilleltensky, 2000).
Following are the alternative solutions which can be adopted by the organization for ensuring balance between the quantity and quality of services, and also for avoiding the destructive spiral:
Building brand of the high quality is the first solution which helps the PIA, but it is necessary for the organization to focus on the pricing strategy also. High price for the quality services only attract elite customers and not the middle and lower income customers. In this context, products and services provided by the PIA must contain the premium features.
Another solution for maintaining this balance is the durability, which means, there are number services which are more or less disposable, and this is targeted by the low-end brands. On the other hand, high quality services are last long and for maximum period of time provide high value services to the customers who paid for the services.
Customer services is the most important approach for the high-quality brands, as service industry only relies on the customer satisfaction for its growth and profitability. Companies need to focus on the interest of the customers and provide best experience to them (Ricchard, 2011).
It is recommended to the PIA to adopt some low cost strategies and make internal changes in its operations and administrations for the purpose of ensuring the optimal balance between the quantity and quality:
- Ensure less wastage and more efficiency in the operational functions of the organization.
- Adopt differentiation and cost focus strategy for the purpose of ensuring low cost, and also for providing best quality to the customers at the reasonable price.
- PIA can also use value based leadership for the purpose of avoiding the destructive spiral, as in this leadership leader’s focus on creating the value by considering the interest of wide range of stakeholders (Akbar, 2009).
Conclusion:
After considering the above facts, it is clear that quality and quantity both play important role in terms of the customer satisfaction. It is necessary for the PIA to consider the interest of the customers and PIA administration before taking any decision in context of the pricing of the products. In case they increase the price of the products then it will definitely affect the on customers of the organization, and this cause negative impact on the performance of the organization. Therefore, it is important for the PIA to take necessary measures for the purpose of maintaining the optimal balance between the quality and quantity.
References:
Akbar, M. (2009). Impact of impact quality trust, and customer satisfaction on customer loyalty, ABA Journal, Volume 29(1), PP-27.
Atiyah, L. (2016). Product’s quality and its impact on customer satisfaction. Retrieved from: https://conferinta.management.ase.ro/archives/2016/PDF/1_7.pdf.
Beheshtifar, M. Borhani, H. & Moghadam, M. (2012). Destructive role of employees. International Journal of Academic Research in Business and Social sciences, Volume 2(11).
Bryson, J. (204). What to do when stakeholders matter. Public Management Review, Volume 6(1).
Cragg, W. (2002). Business Ethics and Stakeholder Theory. Business Ethics Quarterly, Volume 12(2), PP 113-142.
Freeman, R. E. & Harrison, J.S. (2015). Stakeholder Theory As an Ethical Approach to Effective Management: applying the theory to multiple contexts. Review of Business Management, Volume 17(55).
Freeman, R.E., Harrison, J.S., Wicks, A.C., Parmar, B. and de Colle, S. (2010). Stakeholder theory: estate of the art. Cambridge: Cambridge University Press.
Planella, S. (2015). Customer Service: The two big Q’s (Quantity and Quality). Retrieved from: https://aremaconnect.com/2015/04/customer-service-the-two-big-qs-quantity-and-quality/.
Prilleltensky, I. (2000). Value-Based Leadership in Organizations: Balancing Values, Interests, and Power Among Citizens, Workers, and Leaders, International Journal of Ethics & Behavior, Volume 10(2), PP 139-158.
Richard, D. (2001). Organization theory and design, a division of Harcourt college publishers, south – western united states of America.
Shatalebi, B. & yarmohammadian, M. (2011). Value based leadership paradigm, Procardia Social and Behavioural Sciences, Volume15.
Springs, J. Ethical Issues of Pricing Strategy. Retrieved from: https://smallbusiness.chron.com/ethical-issues-pricing-strategy-17441.html.
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