PESTEL

● Political: favorable political climate in Canada; judiciary independence;

regulatory practices; aviation was partially deregulated, allowing some
companies to consolidate
● Economics: high rates and fees; full prices climbing
● Social: terrorist attacks; disease in China and Canada, higher level of social
concerns in the society; high education level; many people nowadays are
very aware of marketing gimmicks; population growth fairly consistent;
diverse country; high living standard
● Technological: mobile phone and internet penetration
● Environmental: Canada is facing a lot of environmental challenges
● Legal: rights of employees are protected by law,

VUCA

The world AIR CANADA needs to How can AIR CANADA be?:
is: be:

Volatile Reliable Security; good reputation; research and development;

low reported problems; high recommendation from
users;

Uncertain Trustworthy good reputation; security

Complex Simple/Direct

Ambiguous Clear/Understandable Marketing communications; public information

Porter’s Five forces

Competitive rivalry (high)

● A lot of competitors/ high diversity of firms

● Intensive rivalry among different companies
● Competitors stay a long time because they make huge investments to enter
the aviation industry
● Exit price and fixed costs are high
● Moderate switching costs (all companies offer the same service, but some
are premium, others low cost)
● Nonetheless, Air Canada strives to differentiate itself through its
premium services and justifies higher prices.

Threat of new entrants or new entry (low)

● The investment required to enter this industry is very high and also require
specific skills and knowledge
● Government regulations are difficult to deal with
● The fact that the companies invest a lot of money, have large infrastructures
and economies of scale difficult the entrance of smaller new companies

Bargaining power of suppliers (high)

● Suppliers are airplane manufacturers, fuel suppliers, labour suppliers

● Normally, a company only have 2 suppliers so it must maintain good
relationships with them, so the bargaining power is high
● The fuel suppliers also affect deeply this market, have a lot of power 🡪 high
bargaining power

Bargaining power of buyers or customers (high)

● Individuals have the opportunity to choose, and the switching cost is low
● Customers want t to always find the cheapest flight for a given amount of
miles, but still expect premium in flight service

Threat of substitutes or substitution (moderate level)

● The Aviation industry has a lot of substitutes; people can switch to train,
car, ship and to any other transport
● Switching cost is low
C1-C4
Product Needs Competition Examples
C Similar Approximately the Intense and Canada Airlines
1 same needs Expected (they merged) 
C Similar: Slightly better or Approximately the Intense and Helicopters;
2 worse in a group of same needs expected Smaller airlines
characteristics with the same
flights destination
but smaller planes
C Completely different Approximately the Less intense and Public transports:
3 same needs very unexpected Bus or Train;
Skype
C Completely different Completely Not intense and Decisions
4 different unexpected

CAPABILITIES

Critical Assets:

● Innovation
● Technologies
● Canada´s largest domestic airplane company
● Air Canada leisure group (not in the text)
● Air Canada enhances its domestic and transborder network through
capacity purchase agreements (“CPAs”) with regional airlines, namely Jazz
● Aeroplan is also Air Canada’s single largest customer. The relationship with
Aeroplan is designed to provide a stable and recurring source of revenue
from the purchase of Air Canada seats by Aeroplan, which in turn are
provided to Aeroplan® members who choose to redeem their Aeroplan®
Miles for travel on Air Canada
● Air Canada also generates revenue from its cargo division
● Safety

Distinctive competencies:
 ● Marketing
● High quality services at a relatively low price
● Branding
● Bilingualism (English and French)

Privileged Relationships:

● Customers
● Suppliers
● Subsidiaries
● Regional airlines

CULTURE

Internal Culture: Air Canada is a canadense company

1. Inclusion and diversity

2. Good customer experience
3. Environmental and sustainability
4. Employees’ well being and excellence

External Culture: “Air Canada has a proud history of supporting organizations

that focus on improving the lives of Canadians. Our support of community
organizations has made Air Canada an active participant in their efforts and in
their successes.” Invest in:

− social fabric of local communities across Canada by supporting charitable

organizations that help children and youth
− o sponsor local events or activities by non-profit organizations which
contribute to your community’s economic growth

Purpose

● Mission: “Connecting Canada and the World”

 ● Vision: “Building Loyalty through passion and innovation”
● Values:  innovation, accountability and ownership; safety first; make every
customer feel valued; working together with colleagues, customers and
community; act with integrity; all employees are valued; drive for excellence

SWOT

Strengthts:

● Largest airline of Canada

● Experienced workforce and a well-established infrastructure
● Significant market position
● Strong brand image
● Strong aviation network

● Advanced technology

● Strong alliances

● Good customer base

Weaknesses:

● Combined company
● Aging aircrafts in fleet 
● Financial difficulties
● Infrastructure and labor inefficiencies

Opportunities:

● Profitable international and business markets

● Flourishing Tourism in Canada
● Launch of low cost airlines
● Customer service improvement

Threats:
 ● Difficulty in sustaining a profit in this industry
● Collapse of the dot-com industries in 2000 which curtailed business travel
● September 11 U.S terrorist attack
● Fuel prices increased
● SARS
● Industry competition (other low-cost carriers)
● Government regulations
● Foreign currency fluctuations

VRIO

● Valuable: financial resources; brand awareness; marketing expertise; brand

image; great distribution system;
● Rare: distribution and logistics costs competitiveness; propensity for
innovation; international presence; problem solving skills; adptability
● Inimitable: efficient production capacities – competitive pricing;

Porter Generic Strategies

1. Cost leadership

Primary vs. secondary

● Real Market: All airlines passing in canada.

● Total Potential Market: All airlines’ passengers in the countries to which air
canada flies.
● Total Potential real Market: All airlines’ passengers in the countries to which
air canada flies - upper middle class/ Business men.
● Primary Strategy: Focusing on the Canada customers
 ● Secondary Strategy: Once the canada market was fully penetrated, start
exploring the rest of the countries

Merges and acquisitions

In January 2001, Air Canada acquired Canada's second-largest air carrier,

Canadian Airlines, merging the latter's operations, becoming the world's twelfth-
largest airline in the first decade of the 21st century.[13] As Air Canada gained
access to its former rival's financial statements, officials learned that the carrier was
in worse financial shape than was previously believed.[18] An expedited merger
strategy was pursued, but in summer 2000 integration efforts led to flight delays,
luggage problems and other frustrations.[18] However, service improved
following Air Canada officials' pledge to do so by January 2001.[18] The airline was
confronted by the global aviation market downturn and increased competition,
posting back-to-back losses in 2001 and 2002.

Motivation: was the second largest airline

Internationalization

Internationalization: Air Canada's coverage extends worldwide to various cities in

the US, Mexico, the Caribbean, Central and South America, Europe, Asia, and
Africa. The airline's network extends around the world by offering customers
flights on a codeshare basis with its Star Alliance partners.

WHY: 

WHEN:

Star alliance - 1997

WHERE: CAGE FRAMEWORK

Cultural Distance

Administrative Distance:
Geographic Distance:

Economic Wealth Distance

HOW:

Value Curves:

Value Customer: Customers preferring comfort/reliability; Upper middle class/

Business men

Value Characteristics: (in values)

The speciality of the strategic objective is that to “act with integrity, we are
responsible. We cultivate an environment of trust. We communicate openly and in
a timely manner. Promote outstanding individuals. Corporation aggregate. Since
the far-reaching innovation, quality and service to the next level.”