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Abstract After 1980s, due to economy of free enterprises, the obstacle to enter into a market gets less severe. The customer* s freedom of choice to select a commercial product has become broader. Therefore, the demands for product quality by customer get higher. In order to increase company*s?信petitiveness, the managers have changed their management from solely profit oriented to customer and employee centered management. The managers want to get a firm grip of customer and employee in order to face the challenge in a rapid changing market. Especially, the concept of Service-Profit Chain was brought out to fully express the essential relation between company*s operation and the satisfaction of employee and customer. In 1987, the domestic airline*s market was then open. Accompanied by Taiwan*s economic growth, the demand of having a larger transportation capacity was getting higher. The quality of land transport was poor and sea transport was not yet developed to see its benefits. Therefore, starting in 1988, Taiwan*s air transport grew rapidly and had reached to peak in 1997. The passenger flights grow on an average of 20% annually. Before 1987, there were only China Airlines and FAT two companies running Taiwan*s flights and Formosa and Taiwan Airlines running offshore island flights. In 1995, the domestic airline expanded to 9 companies. The domestic market growth had slowed down and the passenger rate of flights gradually also went down because of expanding capacity by airlines. Although the government had stopped to accept new application for domestic airliners in order to avoid inferior competition to cause below standard air safety quality. However, this did not stop furious competition in domestic market. This study uses Service-Profit Chain concept to make a verification work on services of domestic airlines, tries to find the applicability of this new concept to the domestic airlines, and study how to create enterprise*s internal and external competitiveness under a high competition environment. By questionnaires, the response data from customer and employee were collected and analyzed with statistic tool to obtain meaningful conclusions in order to provide both the government and domestic airlines a reference for their management operation.
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