Comprehensive Analysis of the Myanmar Market for Airline Services - Case Study Example

MANAGEMENT ASSIGNMENT Table of Contents 0 Introduction 2.0 Political Environment 2 Government stability 2.2 Government and contribution 2.3 Analysis 3.0 Legal Environment 3.1 Regulatory framework 3.2 Business laws 3.3 Labour laws 3.4 Taxation laws 3.5 Analysis 4.0 Economic Environment 4.1 Interest rates (%) 4.2 Inflation rates (%) 4.3 Currency exchange rate ($) 4.4 Free-market/command /mixed economies 4.5 Economic trends/forecasts 4.6 Tax policies 4.7 Analysis 5.0 Socio-cultural Environment 5.1 Hofstede’s Cultural Dimensions 5.1.1 Collectivism Vs Individualism 5.1.2 Power Distance 5.1.3 Uncertainty avoidance 5.1.4 Time orientation 5.1.5 Quality Vs Quantity of life 5.2 Analysis 6.0 Technological Environment 6.1 Technological infrastructure 6.2 Communication networks 6.3 Logistics networks 6.4 Analysis 7.0 SWOT Analysis 7.1 Strengths 7.2 Weaknesses 7.3 Opportunities 7.4 Threats 8.0 Recommendations 9.0 References 1.0 Introduction Qantas is an Australian Airline company and the oldest company in the history of the airline industry. The company offers flight services around the globe through flight destinations in almost all the continents including Africa, Asia, Oceania, Europe and America. The company is based in Australia with flight operations in numerous countries around the world. Myanmar is among the company’s flight destinations. The company has been identified with exemplary services and some of the types of skills required by the company include proficiency in customer relations, flying, aeronautical engineering, marketing, finance and disaster management. In the case of Qantas in Myanmar, services are provided by Myanmar nationals through training by Australians. This is because the company aims at creating equality in its services across all of its destinations and subsidiaries. The use company is using Myanmar nationals in order to increase make smooth penetration in the country’s airline industry. There is also the idea of employee ideas and sharing of ideas. The idea is that Qantas is making plans of expanding its operations to Myanmar. 1 This report aims at providing a comprehensive analysis of the Myanmar market for airline services including the country and company profiles in order to make an evaluation of the business situation. The analysis will mainly include the PESTEL and SWOT analyses for both the country and the company respectively. Evaluations and final recommendations are based on the results of the above analyses. 2.0 Political Environment 2.1 Government stability Myanmar has been under military rule for a very long time with signs of political instability. Elections in the country have been marred by incidents of violence and use of force by the military resulting in the death of people. The last time the country held its election was in 1990. This was two years after a coup and overturning of a civilian government. The military government is headed by SPDC which was formerly known as SLORC. The country has had an unstable government since the overthrowing of a civilian government in 1988. The most evident sign of government instability is the lack of a stable constitution and the increasing problem of a humanitarian crisis. The country has been lacking a sufficiently strong constitution and efforts to make amendments or have a new constitution have been unsuccessful. 2.2 Government and contribution The government of Myanmar has in the past had sour relations with the international community for the simple reason that there is the existence of military rule. However, the increasing rates of violence and killing of people have resulted in the country opening to the world economy in search of assistance. The country has managed to build up good relations with neighbouring countries such as China, India and Thailand. This is evident from the fact that Myanmar is a member of SEAN. The government has also been engaged in promoting political stability by making arrangements for new and democratic elections. Violence has been condemned and is punishable by law. 2.3 Analysis Myanmar’s political situation has an effect on the business in form of legislations and the operating environment. Cases of political instability have the effect of making business unfavourable because of cases of unfavourable legislations and violence that may disrupt normal business operations. 3.0 Legal Environment 3.1 Regulatory framework Rules and regulations are provided for in the constitution and the government is responsible for the overall administration of the rules and regulations. The country’s regulatory framework is based on the principle of equality and justice. 3.2 Business laws The country has stringent business laws and regulations including bans on imports from Canada among other countries. 3.3 Labour laws In recent times, the country has been reluctant of adopting labor laws as provided for by the International Labor Organization. However, increasing pressure from pressure groups and the international community has seen the country drafting labour laws. The existing labor laws provide for seven maximum working hours and does not allow for trade unions. The minimum working age is 13 with numerous cases of child labor within the country. The minimum wage is 15,000 Myanma kyat per month, which is approximately $0.25 per day. 3.4 Taxation laws Taxation laws on foreign investments are identified on the basis of the country’s foreign investment laws. The laws include company taxes which are slightly higher for foreign investing companies. Foreign companies are required to file for tax compliance and receive certificates of compliance in order to continue with their operations. Individuals are also taxed with the common tax laws including Pay As You Earn (PAYE) and Value Added Tax 3.5 Analysis The above analysis is important to the company because tax is a one of the largest expenses for the business. They determine the level of income for the company. In general, the legal environment guides the operations of the company and provides limits for its activities. The analysis ensures that the company understands the laws that will govern its operation before making an entry. 4.0 Economic Environment 4.1 Interest rates The country has high lending rates with low rates for deposits. Its lending rates are approximately 17.0 percent and deposit rates stand at 12 percent. 4.2 Inflation rates According to the country’s 2008 consumer price index, its level of inflation rate was 30.1 percent. The trend has been declining since the country opened to the outside world and allowed foreign investments. 4.3 Currency exchange rate ($) The country’s currency is relatively strong to the US dollar with an exchange rate of 0.15 as of the year 2011. 4.4 Free-market/command /mixed economies The existing economy is command with the government regulating supply of goods and determining prices. The country has been facing the problem of high prices with short supplies. 4.5 Economic trends/forecasts According to statistics from the International Monetary Fund (IMF), Myanmar is noted to be on its path economic recovery. The UN has tipped that the country will record a 5.8 percent increase in its economic growth with the introduction of a new government. 4.6 Tax policies Myanmar applies a flat tax rate of 30 percent for companies operating under the Myanmar Companies and the Foreign Investment Law. 4.7 Analysis The economic environment is the largest external business environment for the company. The analysis aids in identifying the various economic conditions and their effects on the operations of the business. This is essential for the preparation of a comprehensive business plan. 5.0 Socio-cultural Environment 5.1 Hofstede’s Cultural Dimensions 5.1.1 Collectivism Vs Individualism Myanmar has the culture of collectivism. This is evident from the large number of partnership companies in the country. Most of the actions of individual members are based on consent from members of the society. 5.1.2 Power Distance Research studies indicate that the country has a low power distance. This is characterised by high levels of socialization between managers and the subordinates, and the existence of liberal democracies. 5.1.3 Uncertainty avoidance Myanmar nationals have relaxed codes of behaviour which explains their low level of uncertainty avoidance. The nationals are less aggressive, unemotional and relatively tolerant. 5.1.4 Time orientation People from Myanmar are characterised by dedication, persistence, commitment and organizational identity and loyalty. Most of them have high levels of personal responsibility and are committed to achieving positive results in their tasks. 5.1.5 Quality Vs Quantity of life The country has most of its population living below the poverty line with increasing prices of commodities. Living standards are very high coupled with high inflation rates of over 20 percent. 5.2 Analysis 6.0 Technological Environment 6.1 Technological infrastructure The country has adequate technological infrastructure for the operations of airline businesses. This is evident from the good conditions of airports and the available machineries such as cranes for loading. 6.2 Communication networks There are also good communications networks including telephone and internet connection. Network signals are clear and Myanmar is among countries with clear communication signals in the region. 6.3 Logistics networks Road transport is the most common means of transport. However, there have been increasing efforts from the government for the establishment of adequate airports to improve transport networks. 6.4 Analysis Myanmar has adequate technology for a business entry given the fact that it is recovering from long periods of bad governance. This is good for the business because it facilitates fast delivery of services and enhances penetration to localized regions within the country. 7.0 SWOT Analysis 7.1 Strengths The company has a strong market presence. Together with all of its subsidiaries, Qantas Airline has flight routes in almost all the continents including Africa, Asia, Oceania, Europe and America. Vast experience in the operations of airline business. Qantas Airlines is the oldest airline in history making it far ahead in experience compared to other airlines. This also includes accountability in terms of operations, technology and service delivery. Comfortable and cost effective flights All the flight classes are fitted with entertainment system including in flight internet and LCD screens in every seat The company offers diverse services in form of classes to meet the needs of diverse consumers. The different classes of flights include first class, business class, economy and premium economy categories (). Commitment to ensuring that there is safety for its customers. This has been achieved through intensive security checks at the airport and secure storage of customer information. The airline also has proper customer charter that includes in time arrival and departure, proper handling of mishap moments at the airport. The operations of the company are environment friendly and aim at attaining a green planet. This is achieved through group environment policy that aims at ensuring the operations of the company are conducted using an environment friendly approach. Numerous goodwill gestures during emergency situations Qantas Airline has received numerous awards and accolades for their exemplary services. The company has been named as Australia’s best airline in on three occasions. The company has also been named five consecutive times as the airline of the year by Skytrax. 7.2 Weaknesses Delaying of long route flights as a result of environmental constraints The company has recorded serious accidents in its flights in almost every decade. This indicates that the company has technical inefficiencies. The company has a conservative policy that requires children not to sit along male passengers during flights. This arouses the feeling of discrimination among male passengers and suspicions of sexual harassment. 7.3 Opportunities Introduction of leasing of large aircrafts in the airline industry. This improves carrying capacity and employment opportunities. The use of points earning in rewarding customer loyalty improves value for customers. Customers can receive advanced categories of services through their points. Some of the categories include silver, gold and platinum. Business clubs offer the opportunity for the company to offer special business related facilities during flights hence offering quality services for the needs of the business community. 7.4 Threats Global fuel crisis. Fuel prices have been on the increase causing the airline to increase ticket price by almost double the initial cost. Practises of extortions can damage the reputation of the company The airline was in the recent years accused of price fixing and fined for such practices. A repeat of such an incidence has the effect of damaging company’s image. Increasing competition from other airlines has the effect of reducing the company’s market share. 8.0 Recommendations The company should consider investing in new and advanced technology in order to improve weather forecasts. It should also invest in improving its technical team to improve efficiency and reduce cases of accidents. Fair policies should be put in place to avoid embarrassing clients and making them feel insecure. Source for cheap and alternative source of fuel Maintain high levels of corporate governance and codes of ethics The business should consider making an entry into Myanmar airline industry. The market has few market players and the economy is still growing with the support of the international community. However, the company should consider making an entry in 2012 when a new government has already been put in place. Entry can be achieved through partnership with local airlines. 9.0 References George, Solomon. Gateways to Entry; Harvard Business Review 60 (September–October 1982): 85–93. McGraw-Hill Companies, 2002. Morrison, Simon and Winston, Charles. The fare skies: air transportation and Middle America, Brookings Fall, 2007. Smith, Moses. The airline encyclopedia, 1909-2000. Scarecrow Press, 2002. Tayeh, Timothy. (2006). The View From Dubai: a speech by Senior Vice President Planning, international and Industry Affairs Emirates Airline; Euro control report (May 20th) Geert Hofstede, “Business Cultures” (p. 8) Ashleigh, Merritt and Robert, Helmreich. “Human Factors on the Flight Deck: The Influence of National Culture” (p. 13) Rueyling Chuang, “An Examination of Taoist and Buddhist Perspectives on Interpersonal Conflicts, Emotions, and Adversities” (p. 38) Jung-huel Becky Yeh and Ling Chen, “Cultural Values and Argumentative Orientations for Chinese People in Taiwan, Hong Kong, and Mainland China” (p. 51) Jonathan, Zhu and Zhou, He, “Information Accessibility, User Sophistication, and Source Cred­ibility: The Impact of the Internet on Value Orientations in Mainland China” (p. 65) Maung, Mya. Totalitarianism in Burma: Prospects for Economic Development. New York: Paragon House. P. 212 Read More