An Audit of the Business Environment of Royal Bengal Airlines - Essay Example

Now-a-days people do not want to close themselves in a specific area of earth. The hunger of increases knowledge and knows the world takes them once to another place. To meet this requirement a new business industry comes in with the name of Travel and tourism industry. Travel and tourism are contemplated to be one of the fabrication industries in the humanity (Coyne 1996, pg 255)1. Once peoples thought that tourism is the action that an individual take a trip for entertaining him self or holiday purposes but now it has changed. In 1976, the Tourism Society of England defined it as "Tourism is the temporary, short-term movement of people to destination outside the places where they normally live and work and their activities during the stay at each destination. It includes movements for all purposes."2 some components such as hotel room or accommodation for their visitors, coach and the variety of meals, even sometimes banking services also provided to the customer from this industry. The main aim of this report is to conduct an audit of the business environment (based on P.E.S.T & Porter's five forces model analysis) on Royal Bengal Airlines and conduct an Opportunity & Threat analysis on the basis of environmental audit and defining its service provided to its consumer and its marketing (partially) area from the country (Bangladesh) perspective. "A collaboration of a group of professionals who shared the same vision decided to be proactive and form RBA in early 2006. The team has evolved quickly and continues to grow from strength to strength. The founding members are UK based and come from a wide range of backgrounds and bring with them vast experiences from the business, academic and aviation world. The visionaries and the founders of RBA have been working towards this project since 1991. Due to various restrictions and limitations in the early nineties it was not possible to move the project forward"3. The growth in the Asian economy, in particular the travel sector within Southeast Asia, has created an opportunity in the market for a new airline. RBA was born as a direct result of this, with the aim of utilizing the potential development of the Asian market and turning this into a profitable and successful airline venture. To analyze the environment of RBA, it's needed to conduct an audit (based on PEST analysis and Five force model analysis). "The simple acronym PEST (stand for political, economical, social and technological) serves well as an aide-memoire when considering the array of environmental forces influencing business activity. Pest analysis assembles a logical and comprehensive picture of the environment"4. By conducting an analysis (PEST) on RBA's environment, it has seen that the organization is in an excellent situation such as the political allaince between both country UK and Bangladesh is good enough to do business. Economic and Technological relation between these countries is higher such as Bangladesh export garments products to UK and Uk export technological product such as machineries, computers and other engineering technologies. As a result company takes economical (in the side of currency sharing) and technological advantage here. The social bond between two countries is higher as there is a cultural sharing and accepting tendency and RBA performing their Corporate Social Responsibility program in Bangladesh. Afterbevluation it can be said that the PEST analysis goes in faovor of RBA. The another analysis is "Five Force Model analysis". "The Porter's 5 Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps to understand both the strength of your current competitive position, and the strength of a position." Five Forces Analysis assumes that there are five important forces that determine competitive power in a situation. These are thoroughly given below: Supplier Power: It assesses how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service. Such as the decision of increase fare is depending on the influence of Oil selling company such as Shell. Buyer Power: It assesses how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to business, the cost to them of switching from products and services to those of someone else, and so on. Competitive Rivalry: What is important here is the number and capability of competitors - Royal Bengal Airlines have many competitors such Gulf Air, Biman Bangladesh Airlines, Saudi Airlines, etc and they offer equally attractive products and services. Threat of Substitution: This is affected by the ability of customers to find a different way of doing what organization do, such as peoples uses Bus, cars, and trains to travel the lower distance. And many shipping organization gives lucrative package for people to switch their travel tendency for using Ship rather than air vehicle. Threat of New Entry: Power is also affected by the ability of people to enter market. In travel and tourism industry the threat of new entry is always higher. The organization provides hotels for their customers, of which most of them are located in different areas such as within the province, besides the historical places, beside the seashore, which allow their client good facilities just as the rest of the rivals in the market. This has been put with the strategy to prevent the switching tendency of customer. But the service will vary in performance depends up to the area and hotel, where customer wants to stay, and also depends up to the class chosen by clients himself / herself. The daringness of RBA's to its client is far superior than its existing competitor. They provide services as like the services are inseparable to its client. As an example, a clients from UK comes to Bangladesh to see the Cox' bazaar sea beach and fix a date to there after the arrival in Bangladesh, if the client needs RBA's agent will make up everything needed to the client up to go back to UK. Its seems an overall and inseparable package to the client. RBA always tries to upgrade its service for its clients. As, to its customers RBA always send fare related information; in some cases at special occasions RBA invite its loyal customers as an honorable person of the party. This strategy works as inspiring strategy to the clients. This has become more efficient to the customer that they end up preferring the services compared to others provided and the sales of RBA increases at a notable percent. The organization has taken a combination of both Geographic and Demographic segmentation strategy for its overall marketing, as its target customer by Geographical segmentation is the people living in Europe, Middle East and Southeast Asia. And to differentiate its clients based on service class it engage in demographic segmentation. But some time the combination breaks down; it depends up to the particular service they offer to its clients. As an example, recently RBA offering discount on its fare in the route of Bangladesh (Dhaka to Chittagong). Here they take the behavioral segmentation based on income level, the targeted customers are mid-level income peoples whose are not regular clients of travel industry, may use the service provided by RBA, as a fantasy of their family or entertainment purpose for a time. To make their service available to the people have several agent office to its targeted country. After complete the PEST and Five Force model analyses on the environment of Royal Bengal Airlines and take short brief on its services, some results comes out. Here these results are given below as Opportunity and Threat analysis. Opportunities: The major opportunity for RBA that the number of competitors is not so high, so it's easy to go to the customer. There is only one domestic airlines is in Bangladesh and majority share of its owned by government, as a result the service quality is so poor. As most of the customer are dissatisfy with the local airlines its easy for RBA to switch that customers to itself. In currency, Great Britain Pound or Dollar is much more stronger then Bangladeshi currency Taka. As a result, in the currency of its motherland (UK) it takes a comparatively lower investment but in Bangladesh perspective it will be a huge investment. So, exit barrier and entry barrier for RBA is much more lower than others. People's living standard is going upper in Bangladesh with the income level. So it's possible for RBA to capture new customer. And foster its sales. As switching cost is lower they can move to another business easily. Threats: The threat of new entry is quite high: if anyone looks as if they're making a sustained profit, new competitors can come into the industry easily, reducing profits. Competitive rivalry is extremely high: if someone raises prices, they'll be quickly undercut. Intense competition puts strong downward pressure on prices. Buyer Power is strong, again implying strong downward pressure on prices. Another major threat lies with currency is inflation. Inflation always shakes the price level but with the inflation it's too hard to increase or decrease the price level because public impression may come worse. Economic Crises is another one great factor now a time. As economic situation comes worse the sales point of RBA may comes down. Recommendation: They should perform social audit and CSR; it will increase the public image about the organization. They should provide adequate training to those personnel whose are directly interact with clients. They should improve their service quality but must be aware that the price is in limit of people. In Bangladesh, almost above 50% people are laying in mid-level income group. So, RBA should look after them with major priority. They should increase their customer care center for make their information available to all. RBA should transform itself as a Green Organization by which it can increase its public image and could get those people as a new market niche whose are aware about environment and environment friendly products. References: 1) Coyne K.P & Sujit, B (1996), Bringing discipline to strategy: The McKinsey Quarterly. No.4. McGraw Publishing Limited Amazon.com pp 154-205. 2) http://en.wikipedia.org/wiki/Tourism 3) http://www.royalbengalairline.com/our_company 4) Brooks, Ian, 1997, " The Business Environment", Printice Hall, Europe. 5) http://www.royalbengalairline.com/our_vision Read More