Business Strategy at Tiger Airlines - Case Study Example

Tiger Airways Introduction The airline industry is one of the most sensitive business industries that requires effective strategic planning in order for a business to thrive. This is mainly because of the vulnerability and susceptibility of the industry to issues such as fluctuation in fare prices, fuel cost, safety regulations and even terrorism. As a result, airline managers have to employ effective strategic planning in order to survive in this murky and volatile business (Kleymann & Hannu 2004). This essay will analyse the strategy employed by Tiger Airlines in a bid to circumvent the uncertainties that followed its six-week grounding because of safety concerns. Key management strategy analysis models such as SWOT analysis and Micheal Porter’s Five Force Analysis model will be used to analyse the effectiveness of the strategies employed by Tiger Airlines. Business strategy at Tiger Airlines According to Waddell et al (2007), a strategy is a short-term plan that aims at increasing the market share of a business, thus making it a market leader in the industry. Often times a strategy is formulated in line with the company’s objectives, mission statement and the vision (Waddell et al 2007). Teo’s article (2012), provides great insight into the unpredictable nature of the airline industry and Tiger Airways predicaments which led to its six-week grounding. From this article it is evident that the management of the airline should put in place effective strategies although indications are that the company is not doing bad in terms of reinventing itself after the grounding period. Already the company has made several steps that are even surprising to the market analysts who were quick to write off the company after its grounding. For a start, the company has acquired a new president who brings in its operations vast experience and skills in its ambitious plans (Teo 2012). Secondly, the company has sought to acquire the Philippine South East Asian Airlines(SEAir). Moreover, the company’s management has focused its efforts towards improving its operations through better utlisation of its aircrafts in Australia and its associate airlines in the Philippines and Indonesia which will inturn help to absorb capacity and promote lower cost units(Teo 2012). In addition to this, Tiger Airways has teamed up with Alipay in China in order to provide to its customers great value fares. SWOT Analysis Based on the findings of Teo (2012), it is to plausible to argue that Tiger Airlines current strategies are effectual. For an airline that is faced with several risks to its operations to come up and show the kind of rejuvenation that Tiger Airlines has shown is not an easy task. The resilience that the airline is showing is a manifestation of the effettiveness of the strategic decisions that management has made. For instance, the decision to change the company’s president has proven to be advantagoues since the new president has provided the company with efficient leadership and strategic skills (Teo 2012). For a business to grow there is need to increase the market base through expansion of the assets and properties owned by the business. Tiger Airlines has directed its effecorts towards increasing the fleet to 67 up from the current 31. Currently the airline is pressing itself to receive its new aircraft from Airbus amid declining passenger traffic. This means that a change in the business environment is not threatening to derail the strategic plans that the airline had before being grounded. However, the management will need to look critical in its decision to increase the fleet in future since reports have indicated that passenger traffic have drastically declined on the routes that the airline operates. This decline is coupled with increasing completion from other airlines like Qantas Airline that enjoys a whooping market share of 65%, China Southern Airlines and China Eastern Airlines both that have identified Australia as a potential market(Teo 2012; SkyNews 2012). In addition, Tiger Airlines strategy of forming association with other airlines in Indonesia and other countries will serve to increase its profitability in the event that the Australian market continues with its decline in passenger traffic. Statistics from the government indicate that Australian market has been on the downtown trend with few routes that serve resource industry indicating resilience. However, the entry of more competitors from Europe and China together with an already dominated market is likely to take a toll on the estimates of Tiger Airlines to make a full comeback. Strategically, the company needs to diversify its operation through opening up of other routes that will counteract the imminent dangers the entire aviation industry faces. Furthermore, an increase in the number of industry players’ most likely drive fare prices down and as indicated the airline industry is very sensitive to changes in fare prices than to anything else (Teo 2012; SkyNews 2012). Tiger Airlines faces a number of threats that can derail its strategic plans. Some of these threats including global uncertainty and softening passenger demand are beyond the control of the company. Yet a proper strategy will ensure that the company continues to survive in such harsh conditions even as it looks for ways to leverage its position as a reliable service provider in the market. Customer loyalty in the airline industry is important because it acts as a shock absorber in the wake of difficult times when what only matter is the loyalty that customers have on the company (Kleymann & Hannu 2004; Teo 2012). Porter’s Five Force Analysis In the wake of increasing competition especially in the airline industry where companies do everything to outshine their competitors, Tiger Airlines has started on the right track in its strategic plan to leverage itself as a worth competitor in the airline industry(Teo 2012). A critical look at Tiger Airlines’ current strategies, it is evident that the company’s strategic planning is aimed at enhancing the competitive edge of the company in the market. Airline industry players depend partly on the revenues from fares and partly on trading in stock on the financial market (Kleymann & Hannu 2004). Tiger Airlines strategy of boosting its stock prices from the deathbed indicates that the company is focused on enhancing its competitive edge in the market. Loosing up to 60% of its stock valuation while on the ground was the most challenging part to the operations of Tiger Airlines, yet the company has managed to raise its status from ‘hold’ to ‘buy’ on the stock market. This is an indication that the company is making a comeback in an industry that is already crowded, competitive and shrouded with risks such as declining fare prices, increasing fuel costs, and stringent regulations from aviation bodies in Australia(Teo 2012; SkyNews 2012). The company’s focus on raising its revenue in the domestic operations is important given the fact that 50% of its revenue is derived from the domestic market. However, the domestic market has stalled since April 2012 and the losses that the company incurs are due to the domestic operations. As such, there is need for the company’s new president to address the dynamic nature of the domestic market, which is likely to hold the airline siege if it is not addressed well. Another strategy that will need incisive decision is the opening of new routes, which in retail world is equivalent to opening of new stores. A more detailed feasibility study need to be contacted before launching new routes as most of the routes fail to give the returns anticipated. Past ventures by other airlines indicate the opening new routes need to be carefully done, lest the company ends up opening another route through which its revenues shall be siphoned. It is important the Tiger Airlines internationalize more its activities but this need to be done with a lot of care. This goes beyond mere expectations by the management in terms of increasing revenue simply because of increased routes. With expectations that airline utilization will improve, the company need to focus on the external factors that are initiated by factors beyond their control (Teo 2012). Further, Tiger Airlines focuses on ensuring that its fleet is fully utilized to circumvent the shocks of underutilization that were brought about by its grounding. In fact, an increase in the utilization of aircraft will lead to an increase in the load factor thus providing the company with more revenue. The “operational turnaround factor” that the airline has achieved surpasses all other companies. This indicates that the company is following a good strategy that will see surpass its target in a period of six months. It is estimated that Tiger Airlines will become profitable as a group within a short period even though few obstacles still stand in the next few months. Once the company manages to go beyond those obstacles it will be possible to return to the initial operational level before the airline became grounded. Tiger Airlines is banking on its profitable and fast-growing operations in Singapore that remained untouched during the grounding season. However, this dependence ought to be a short-term measure as lessons indicate that Singapore market can only support a fleet of 20 aircraft and it is a relatively slow growing market. As such, the strategic plan needs to go beyond the Singapore market because the company will need more sources to support its plans. (Teo 2012). Conclusion The essay has analysed the strategic measures that Tiger Airlines has put in place in its management and operations that have enabled the company to rise from a near collapse to a level where it is optimistic to survive in a difficult business environment. The findings of this paper depict that Tiger Airlines current strategies are effectual since within a period of six months managed to protect its btions usiness oper through financial management, customer base building, increase of its assets and transformation of its business operations. References Kleymann, B. & Hannu, S. 2004, Managing Strategic Airline Alliances, Ashgate Publishing Ltd, Farnham. Kossmann, M. 2006, Delivering Excellent Service Quality in Aviation:  A Practical Guide for Internal and External Service Providers, Ashgate Publishing, Farnham. Lumpé, M. 2008, Leadership and Organization in the Aviation Industry, Ashgate Publishing, Farnham. SkyNews, 2012,Tiger airways set to make comeback, viewed on September 2 2012, Teo, M. 2012, Can Tiger Airlines Make a Comeback? The Edge Daily, viewed on September 2 2012, Waddell, D., Devine, J., Jones,G.& George, J. 2007, Contemporary Management , 2nd Ed,. McGraw-Hill, North Ryde, NSW, Australia. Read More