ANALYZING MANAGERIAL DECISIONS 1
Organizationsare required to make strategic considerations when making decisions.Markets are very competitive, and hence companies may not be able tomake profits consistently (Brickley et al., 2016). The powerof a business to exist is influenced by the creation of effectiveentry barriers. The revenue realized from the flights cannot covercosts of flights between Washington, D.C, and Francisco. The paperdiscusses if United Airlines should discontinue or continue withflights between Washington, D.C, and Francisco.
Basedon the case, the United Airlines need to stop their flights betweenFrancisco and Washington D.C. The company is supposed to evaluate thecost of the operation and ensure that price is above or equal to thelong-range average rate. Since the operation is not profitable, thebest option is to drop out the flights (Brickley et al.,2016). Continuing the flights may make United Airlines lose highrevenue and break the success of the whole business.
Reassessingthe situation on marginal analysis may require United Airlines todevelop strategies that increase the operation’s profit. Theflights between Washington, D.C, and Francisco should not beterminated because they may influence several negative consequences.Disruption of flights may make customers shift to other airlinecompetitors hence decrease the revenue of the company. The companyshould consider the loss linked with both discontinuing andcontinuing the flights and make a conclusion. If the company stillearns a high overall profit with the existence of the Francisco toWashington, D.C flights, there is no need to drop the operation(Brickley et al., 2016). The United Airlines can encounter theissue by reducing the number of seats if they is low usage. Acompetitive edge can be gained by enhancing the quality of servicesand raising the prices.
Brickley, J. A., Smith, C. W., & Zimmerman, J. L. (2016).Managerial economics and organizational architecture. NewYork: McGraw-Hill.