Competitive Positioning Strategy of SARAM Airlines - Case Study Example

AIRLINE FINAL STRATEGIC AUDIT REPORT Company 4 Team members: Danay Sarduy - Isis G. Ramirez Introduction In the current contemporary world, most global airlines faces allot of challenges that result from a competitive environment as well as the global recession. However, SARAM Airlines have neither had an aspect of downsizing in either of the departments or the overall organization’s structure. This is due to the competitive advantage gained over time since the diversification of its operations. As a result, a sustainable competitive advantage of the company has been built up by efficient management of ridership in financial activities. Thank to the corporate governance headed by the president and its board of directors of the company. Position analysis that will be discussed down in this report, considerably received much attention particularly during market examination and determination of growth of the company. It adopted relative positions that explored new avenues for operations for instance, according to the mission statement of initial strategic plan; the company was to explore new routes, under served or poorly served ones. This is where Company’s operations were comparable with the others in the industry and therefore the differentiation position that based on quality led to success. This enhanced high returns on revenue depicting good financial performance. For example, provision of good travelling services (provision of water to the travellers) at a reasonably priced allowed the company to exhibit a business advantage over the others in the market. Competitive Positioning Strategy of SARAM Airlines Like any other competitor in the market, SARAM Airline had to position itself favourably in order to confront the competitive environment in the global market. Therefore, during analysing of the competitive position strategy of SARAM Airline, two schemes were used; Simple Correspondence Examination: In this scheme, the relationships between SARAM Airline and service attributes were examined. However, it is important to note that this analysis cannot relate customers’ attributes and their preferences when choosing airlines. Also, choice depends on socioeconomic aspects as well as tour characteristics of the customers. Multiple Correspondence Analysis: This type of analysis merely interprets the relationship between service provision and the long term results dignified by these services. The two mode of competitive positioning strategy analysis will explicitly describe the relationship of service provision and customers’ preference that would determine the overall performance of the Company in the competitive environment. a) Simple Correspondence Examination The graph bellow shows the profit performance of SARAM in the last four quarters On the first quarter, the company emphasised much on improving the standards of service provision to the customers. Promotion budget of $2,500 as well as provision of in-flight magazines was among the service rendered to the travellers. Also, training was in the agenda during the 1st quarter and was valued at $1,000. At the end of the day, these services among others recorded 104 business index and an increase of $10.71 in the stock price. The net profit therefore as indicated by the graph relatively increased. Looking at the flight record in the 2nd and 3rd quarter, reliability was exceptional with a record of 92.4%. Generally, the Company raised its competitive position over the last 4 quarters through on-time performance especially on service provision before, on and after the flight. b) Multiple Correspondence Analysis MCA (multiple correspondence analysis) compares the strength of the competitors in the market and answers why the one company is more powerful than the others regardless of the strengths they exhibit. It was noted that SARAM Airline performs well in two routes with regards to service qualities like seat comfort as well as food and drinks provision as compared to other flights in the same routes. SARAM Airlines has unique ticket price that based on the kind of services a customer needs to be rendered to before, during and after the flight. Comparing this to some of the competitors in the market who experience poor flight safety and seat comfort, SARAM Airlines account for every situation that needs improvement as implied by the budget. Generally, the competitive position of SARAM Airlines has relatively changed. First, the company gradually changed from regional operations to global operations. The justification of this is that at the end of the 4th quarter, SARAM airlines had extend its operations to five companies across the globe serving different regions (29R, 32C, 7E, 39B and 20R). Secondly, the market share of SARAM Airlines is enlarging continually. The graph below shows the number of seats sold over the last 7 quarters. From the above graph, it is very clear that SARAM Airlines share in the market is continually growing though of various challenges for instance recession. Over the last three quarters, the Company have really enjoyed good returns from its leverage of financial practicability. SARAM’S Airline Mission Statement In order to prosper in the competitive airline environment, the Company modified its mission statement to “enhancement of sustainable development in service quality strategies in the airline industry.” This mission statement was based on three universal considerations: Encourage competition in the marker in order to improve quality of services, Safeguarding customers interest and, Encouraging small development of small affiliated firms in the industry. Basically, the success of this mission statement was envisioned to be good customer segmentation, modified service and inclusive performance measurements of the company. External Environmental assessment Analysis of opportunities and threats to SARAM Airlines provide a tremendous direction of the company especially at the end simulation. Fresh off 8th quarter summary, the following were perceived; Opportunities at the industry level Expansion: Just at the end of the 8th quarter, the company added two more aircrafts (Aerospatiale ATR42 and Embraer ERJ135). This means that further growth is very likely with SARAM Airlines. Acquisitions: It is unquestionably possibility that there will be further acquisitions in subsequent quarter especially with increasing market share of SARAM Airlines in the region. Opportunities at the Societal level Market Share Gain: Some of the major competitors have experience layoff of workers of late that build a negative light to them. With this, SARAM Airlines would capitalize on the failure of other competitors in the market and increase its growth. The emergence of new technology is also an opportunity in which the company can utilise for the purpose of development. New plane technology would encourage differentiation in the market thus increasing the dominance of SARAM Airlines. Threats Immense Competition: Airline industry is becoming incredibly competitive. This would possibly lead to margin contraction especially when getting customers. Susceptibility to raise in fuel costs: A rise in oil prises swallows means passing the costs to the customers by increasing fare prices. This would lead to loss in business due to cost swallowing by the company. Also, the global skyTrax quality system will still likely to hinder the company since the organization has not flourished enough to be in the high rank of airline classification according to the system. Internal Environment Assessment Strengths Corporate Structure of SARAM Airline: Apparently, the corporate team of the company has a record of making flourishing acquisitions. For instance, the board normally decides to acquire enduring airplanes in order to reduce costs of repairs as well as getting bulk price cut. Corporate Culture and Mission: The current mission of SARAM Airlines communicates company’s aspirations which will influence behaviours and resource allocation. Sustainable development in the mission statement was used particularly to express the way customer services is ought to be carried on in order to enhance continuous improvement culture. It also makes employees part of their work morals by enacting team spirit. This entirely focuses on the competitive edge of the company. At the present, SARAM Airlines has established a strong fleet operation that incorporates training and development of staff in all departments. Weaknesses The company is highly dependent on travellers’ pay as revenue and cargo operations. Consequently, the cargo operations on the other side records negative margin revenue of -4.4% while the company still operate on that. Maintenance as well in cargo department a high financial figure of 16.9% and has declined SARAM’S profit. During low travel season, the company experience decline in profits as well. SARAM Airline also faces low worker productivity. The corporate culture of SARAM is normally based on loyalty and worker appreciation. This often leads to much concentration of corporate environment rather than focus on business operations. Management Key Objectives 1. To enhance effective market access and products diversification in order to widen the scale of revenue. Strategies Increasing market share of existing products. Introduction of existing products into the new markets. Developing fresh products for new markets. 2. To remedy the decline in total revenue that is brought by poor cargo operations. Strategies Evaluation of the old system of handling cargo and integrating an advanced system that is cost effective. Outsourcing of effective cargo handling procedures from more advanced companies. Recommendation of high standard policies that protect company’s resources from corruption and other dishonourable activities in the department. 3. To enhance successful alliances and franchises through collaboration and without transfer of ownership. Strategies Information exchange among the willing partners. Combined bidding for global projects. Collective bargaining. These objectives have relatively changed since the mission of the company currently is far beyond focusing on regional flights but international flights. There are a lot of ambitions that the company developed at the end of 8th quarter. For instance, the acquisition of the two aircrafts shows a sense of wider access to the market. This enhances a gain in competitive development through rapid market development. Measurement of Performance Measurement of performance during simulation would be a bit different from initial and midterm audit. However, it may use the variables such as efficiency and effectiveness that were presented in Midterm report. It entails measurement of two elements; Airline Quality Service, reliability and stock price. Trip profile of the passengers. NB: Bearing in mind the concept of position strategy, attributes as discussed in the introduction play a major role in measuring the performance. a) Airline Quality Service, stock price and reliability Airline quality service entails airline ticket price, flight on time, flexibility of flight (choosing seats), cleanliness, entertainment facilities, flight safety and airline image. The table bellow shows how the objectives are measured through evaluation of Airline services. Attributes Always 1st Airlines SARAM Airlines JIT Airlines Dream Airlines Service quality 72 76 91 91 Stock price $26.04 $12.53 $35.63 $25.60 Reliability 95.20% 94% 97.20% 96.40% b) Trip profile of the passengers This performance measure examines the loyalty of a customer to SARAM Airline Company. Trip profile entails trip characteristics like; How many times have the customer used the services of the company? The purpose of the trip? How was the experience? How the customer did purchase the ticket? The Director of Board Action Plan and Business Finance is responsible for tracking quality service, the performance of the stock price and the reliability of the company. Head of department in Management of Operations and Passenger Services is responsible for tracking trip profile of the passengers. Management Team’s decision making process procedure Since an effective decision making is an inclusive process, first, consultation from all departments was very important. This allows examination of information that would be presented to the management team of the company. Secondly, setting priorities especially on the key objectives was also very vital. This allows order in the process of achieving them. Read More