MANAGING STRATEGY CHANGE IN THE CONTEXT OF SIGNIFICANT DISLOCATION TO THE BUSINESS ENVIRONMENT AND A STRONG STAKEHOLDER PRESENCE (WESTERN AIRLINES, DEREGULATION)

The primary hypothesis of this thesis is that in situations requiring substantial strategy realignment in response to dislocation in the business environment and characterized by significant stakeholder power, management's ability to implement these changes will depend upon developing a strategy that reflects, and is seen to reflect, the interests and needs of those stakeholders. To this end the general manager is required to see his task as much as a political as well as a technical challenge.;The research is based on observations of the strategy adjustment process at Western Airlines Limited in the wake of deregulation for the U.S. airline industry in 1978. Many new low-priced low-cost airlines emerged shortly after the legislation was signed. As these airlines rapidly gained market share, they created sufficient pressure to force established carriers to adjust their prices, and thus their operating costs, downward. As this industry had a very high percentage of unionized employees, there was strong institutional resistance to loss of pay and employee benefits.;To understand the tasks such an environment imposes on managers, this thesis analyzes a "Changing Private Sector Management System." It differentiates between two perspectives on management roles which reflect the political realities on the management process of "power" groups other than the executive management. In situations where stakeholder power is limited, the option of traditional "management rights" to "command and control" decision-making in the enterprise remains intact. In situations where sufficient stakeholder power exists, effective managers must "negotiate" with such groups to develop new strategies.;The cost of managers misperceiving the true context in which they are managing relates not only to finances or market shares, but also to the probable loss of management control over the process by which the final strategy changes are settled, and further, may result in permanent and fundamental changes to the governance of the organization.