High Flight Airlines Airline in Southeast Asia - Essay Example

? High Flight Airlines of the of the Number Mission ment High Flight Airlines (HFA) will be the most favored domestic airline in South-east Asia. It will be the routine primary choice carrier for the travelling public and set benchmarks, which other competing airlines will seek to match (Jet Airways, “Our Mission Statement”). HFA will attain this paramount position by offering a high quality of service and consistent, comfortable and proficient operations. The company will cater to improve the impression of domestic airline travel into a world class domestic airline. HFA will attain these objectives alongside ensuring steady profitability and maximizing value for the investors. The underlying idea of HFA is to provide its employees with an atmosphere for excellence and growth (Singapore Airlines, "Singapore Airlines - About us"). The primary objective of HFA is to fill a niche in the emerging air-travel and cargo markets linking destinations all over the world in order to achieve soaring and profitable load factors by identifying and serving key routes that are currently unexplored, un-served or inadequately served. Their idea is to reach out to places where considerable unmet demand exists. HFA plans to set a new benchmark for air service and professionalism both in the target market and beyond. The underlying strategy of HFA is to utilize the latest technologies related to aviation in order to design efficient and effective systems and to build quality control from the onset in order to ensure the highest level of operations, safety and services, which are all based around the comfort, convenience, needs and wants of the passenger and the cargo clients. PESTLE Analysis The company is planning to expand in the South-East Asian region. The regional headquarter as decided by the board members will be set up in Thailand, given the consistent economic and financial performance of the country over the last few years. In addition to that, another aspect that influenced the board members to choose Thailand as the destination for setting the regional headquarters is because of its position relative to other South-East Asian countries and its connection with them. The following section is an in-depth PESTLE analysis of Thailand which will help the company to assess the degree of favorability as far as setting up a regional headquarter in the country is concerned. Political Analysis Thailand has implemented a parliamentary, democratic structure of government, with the King as Head of State under the Constitution, exercising the sovereign power in the administration as Thailand is a sovereign state which is free to perform her internal and external affairs without pressure, control, or intervention from other countries. The government, also known as the administration, along with the legislature and the judiciary, is the national authority whose primary responsibility is to govern the country and formulate strategies that ensure national development from different aspects. Economic Analysis Thailand, demonstrating a strong fiscal and financial stability over the past few years, has also established a suitable structure and foundation that supports economic development. The country has always accepted the free trade mechanism and has been at the forefront promoting international trade and development. As an export oriented country, its stability depends on the world economy. The government emphasizes a lot on developing the country's infrastructure and stimulating all aspects of the economy in a variety of ways. Year 2012 2011 2010 2009 Thailand's GDP per capita (World bank, "GDP per capita (current US$") $5,480 $5,192 $4,803 $3,979 Currency Baht Currency Code THB Fiscal Year October 1 - September 30 1 USD 31.9849 THB (Oanda, "Currency converter") Socio Cultural Analysis Thailand's population is diverse in terms of ethnicity and race. Citizens of Thailand are from Thai, Mon, Chinese, Khmer, Lao and Indian descent. In addition to that, citizens who reside in different parts of the country, more often not, tend to have specific characteristics and appearances owing to the differences in geographical and environmental features. The main language that is spoken in Thailand is the Thai language which belongs to the Thai family. However, there are different dialects of the language spoken in different regions of the country. Buddhism is the religion that is followed by the majority of the population (over 90%). People in Thailand prefer doing business with people whom they respect. Relationships develop gradually over several meetings. Foreign business officials should be respectful and courteous when dealing with Thai businessmen as that is one way of developing necessary harmonious relationships within business. Technological Analysis Thailand is a country which has shown significant technological and scientific progress over the last decade. The underlying goal behind the advancements is to create valuable knowledge bases that can be implemented in order to extend Thai local wisdom into commercial benefits. In addition to that, they also focus on elevating the level of R&D activities as a mechanism by means of which the economic and social development can be driven forward through the efficient use of resources and research networks. The R&D organizations which have contributed significantly towards the technological advancement of Thailand are the National Science and Technology Development Agency (NSTDA), National Center for Genetic Engineering and Biotechnology (BIOTEC), National Metal and Materials Technology Center (MTEC), National Electronics and Computer Technology Center (NECTEC), National Nanotechnology Center (NANOTEC) and Technology Management Center (TMC). Environmental Analysis Thailand is situated right in the middle of mainland South Asia. The country's topographical features include high mountains, upland plateaus and valleys. In addition to that, the country has a vast central plain which is embellished with rivers, islands, forests and sea coasts, thereby making it rich in resources. Thailand's position, relative to all the other countries in the South-East Asia, gives it a competitive advantage in itself. That is why the country is considered as a favorable destination for many companies for the purpose of conducting business. The link that it shares with all the other South-East Asian, Asian and Pacific countries makes it a prospective destination for the purpose of conducting international trade (Wandile, “PESTLE analysis of Thailand”). Legal Analysis The government in Thailand has a very liberal attitude towards international trade and business. The country is a member of the World Trade Organization and the Association of South-East Asian Nations (ASEAN) organization and is committed to the reduction and removal of tariffs, non-tariff barriers and duties to trade within an agreed timeframe. The primary responsibility of the Export-Import Bank of Thailand is to assist exporters by providing them with financial assistance and the liquidity as and when needed. The country's government also gives certain degree of privilege to the foreign and domestic countries operating within the country, in terms of reductions in taxations and lowered import duties. So, it is evident that the country's legal framework supports international trade and business and encourages foreign investors to invest in the Thai economy. Competitive Threats HFA's major competitors will vary depending on the market and the route that it serves as well as the category of passengers. However, for the most parts, competitors can be expected as follows: Country Airlines Thailand Nok air, Thai airways, Bangkok airways, Orient Thai airlines, Phuket air, Thai Air Asia. Malaysia Air Asia, Malaysia airlines, Berjaya air, Malindo air. Philippines Cebu Pacific air, Pacific air, Philippine airlines. Indonesia Garuda airways, Lion airlines, Mandala airlines. Singapore Jetstar Asia, Singapore airlines, Silk air, Tiger airways. (Source: Nations online, "Major Airlines of Asia and the Middle East") The carriers, which are large and more established, more often than not suffer from a lack of flexibility as they focus on serving their main intra-Asian routes and Trans-Atlantic European routes. The regional airline companies, which are relatively smaller in size, are focused absolutely on their core regional services. Negative feedbacks have been received in case of many South-East Asian airlines regarding their poor service which had resulted in damaging their reputation. However, Air Asia, Singapore airlines, Thai Air Asia and Thai airways will be the potential competitors of HFA owing to their reputation as premium providing world class services and that too at a relatively cheaper price and also, due to their significant market alongside their larger customer base. The level of competition highlights the importance of HFA's three dimensional strategy which is to reach out to under-served, un-served routes and key niche markets where the company will lay a stable foundation by creating its own market as well as meeting high travel demands on key seasonal, regional and intermittent routes. In addition to that, it also stresses the importance of standing out in the perception of the passengers as an airline that offers superior level of service and convenience, thereby implementing technologies and utilizing a service-oriented staff in order to attain recognition and passenger preference right from the very beginning. Resource audit The resources of HFA can be best audited through a value chain analysis done as follows: FIRM INFRASTRUCTURE HFA will increase its capacity in international routes and in order to facilitate that, it will include 4 Boeing 777s this year along with an Airbus A380 and A360. The company operates mostly in the Asian, African and the European countries with its regional headquarter based in Switzerland. The robust structural hierarchy of HFA enables the company to make use of a massive amount of specialist knowledge in order to gain competitive advantage over its peers. HUMAN RESOURCE MANAGEMENT Directed towards achieving the highest level of customer satisfaction, HFA has been attracting the best employees since its foundation in 2002. The company’s staff members includes talented employees with significant technical and managerial expertise who cater to optimize the business operations in order to maximize the value for the company alongside ensuring high quality services for the customers (Dekker 1-23). TECHNOLOGY DEVELOPMENT HFA has invested a considerable amount of resources and has added value in this category compared to its competitors in order to provide their clients with a world class flying experience. The underlying idea of the company is to employ slack resources that can be utilized in order to enhance services such as, installing individual LCD screens. PROCUREMENT Due to the size of the company and the scale of its operations as well as the historical business alliances and relationships with its clients, HFA has been able to leverage its supply channel efficiently and by attaining economies of scale, has conducted operations efficiently in situations where even its competitors have failed. Inbound logistics The company will stock products from a number of suppliers based in Thailand, UK and USA, thereby maximizing their bargaining power. Operations HFA will carry its Airline operations connecting the western and trans-Atlantic countries to the Asian, South East Asian and Pacific countries at a relatively lower price than its competitors. Alongside that, the company will also introduce mechanism in order to increase baggage security as well as provide quick check in and online booking services. Outbound logistics Customer service will be the major outbound logistics service provided by HFA. In addition to that, its access to bigger databases of Airport slots will enable its passengers to access the mainstream destinations worldwide. Marketing and sales HFA will facilitate efficient market communications to all shareholders. Moreover, the brand value of the company will allow it to allocate larger budget for the purpose of marketing and sales. Post sales service Offering customer loyalty club card to regular passengers. The club card includes discount offers which can be availed in their next purchase of flight ticket. (Source: Recklis, “The value chain”) Physical Resources HFA will include diverse technologies as well as the substantial resources under the physical resources. For example, the company headquarters, administrative office and airport hubs will be the concrete resources. In addition to that, HFA will also develop different technology based on flight simulations, which will fall in the category of physical resources. Financial Resources HFA’s financial resources include the revenue from sales, the cash balance, working capital as well as the creditors. As mentioned earlier, the operations will be mostly self-financed and some amount will be borrowed from private investors as the company is yet to go public. Intangibles HFA’s intangible resources include trademarks and patents. The company will design its own logo to form an inimitable individuality for itself. In addition, the company will also patent its brand name (Liang, “An exploratory study on Air Asia’s critical internal success factors: A resource based view of sustainable competitive advantage of low cost airline business model”). Bowman’s Strategy Clock The strategy clock is represented in the following figure: Figure 1: Bowman’s strategy clock (Source: Strategy explorer, “Do you have a competitive strategy?”) Price based strategies (Route 1 and 2) The ‘no frills strategy’ (route 1) merges a low price with low perceived product or service benefits and emphasizes on a specific market segment. This market segment consists of price sensitive buyers who either choose not to buy or cannot afford better quality goods. This market segment might appear unattractive to major airliners. However, it can offer prospective opportunities to a relatively new airline like, the HFA. The low price strategy (route 2) is followed by companies whose plan is to maintain the same quality of products and services offered by their competitors but a relatively lower price. This has been a competitive strategy adopted by many companies, over the recent times, in order to attain competitive advantage, thereby achieving a larger customer base. Having analyzed route 1 and 2, it can be said that HFA will implement the low price strategy in order to segment its market with economy class travelers initially. They will cater to provide superior quality services at a relatively lower price to the price conscious customers. In this way, although the company will be achieving lower margins, yet it will avoid the risk of price competition, considering the fact that it is expanding into a new market filled with potential competitors. The hybrid strategy (route 3) A company adopting this strategy seeks to achieve both product differentiation and low price compared to its competitors. The extent to which this strategy might prove to be effective in favor of the company depends on the company’s ability to deliver enhanced services or benefits to customers at lower prices, whilst achieving higher profit margins for further reinvestment in order to develop and maintain the bases of differentiation. HFA will use the hybrid strategy in order to increase its fleet size by purchasing its fleets which are 10 to 15 years old, thereby reducing the cost of new fleets. This will help the company to realize higher profit margin whilst providing good quality services to its customers, at a relatively moderate price. Differentiation strategy (route 4) By adopting this strategy, HFA will aim to provide products and services that offer benefits which are different from the ones provided by its competitors. These benefits are highly valued by the customers. The major aim is to attain competitive advantage by offering better products or services at the same price or maybe slightly higher in order to increase the profit margins. This differentiation strategy adopted by HFA will be with or without premium. HFA will offer the seats at a relatively lower price but on the other hand, will charge for services like, food, drinks and usage of toilets on the aircraft, thereby making it particularly different from other airlines. Focused differentiation (route 5) HFA, by adopting this strategy, will cater to provide highly perceived product or service benefits by justifying a substantial price premium, but only to a niche market. The niche market that HFA will target is the one comprising of regular travelers who does not take any baggage and only uses the seat. These are basically business class travelers who pay premium price for their seats, thereby helping the company to realize significant profit margins which can be used for reinvestment. Failure strategy (routes 6, 7 and 8) This strategy does not provide the expected value for money in terms of products price, features or both. So, the strategies that are formulated within route 6, 7 and 8 are destined to fail. Strategies outlined within these routes are generally followed by monopoly organizations. Having done a PESTEL analysis of the market, it can be said that HFA is in no way a monopoly organization, considering the fact that it has number of able competitors, thus, highlighting the fact that HFA cannot afford to implement any of the strategies stated under route 6, 7 and 8 (Quy, “British Airways Strategic Plan”). Conclusion HFA is a superior standard international and domestic airlines company that aims to provide a world class flying experience to its customers. The company is planning to expand its operations into the South-East Asian corridor by establishing another regional headquarters in Thailand. The PESTLE analysis of the market suggests that it is a prospective investment opportunity for the company, through which it can realize significant gains, thereby maximizing their value. The company has adequate amount of resources at its disposal that is required to start its operations and ensure its sustainable development in the South-East Asia. The strategy is well-defined and clear and is directed towards achieving the highest customer satisfaction level, alongside generating profits for the company. Works Cited Dekker, Henry C. Value chain analysis in inter firm relationships: a field study. Management Accounting Research 14.1 (2003): 1-23. Print. Jet Airways. “Our Mission Statement.” Jet Airways. Jet Airways (India) Ltd, 2013. Web. 30 November, 2013. Liang, Cheing W. “An exploratory study on Air Asia’s critical internal success factors: A resource based view of sustainable competitive advantage of low cost airline business model.” Academia. Academia, 2012. 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