M III

Radhika Agarwal

MBA07105 C 09/03/2022

Strategic Management - I
Managers Professor Swarup Dutta

Declaration:
1. I have submitted faculty feedback 30 minutes prior to appearing in the End-Term Exam.
2. I have not copied the answer/matter in this answer booklet from my classmate, internet
and any other sources.

Signature of the Student

1. The CEO of a large airline firm operating in India has asked his Corporate
Planning Officer to make an analysis of the business trends with specific
reference to the airline industry. For convenience’s sake the analysis may be
divided into the following parts.
a) Identify major trends in the macro environment relevant to the airline
industry?
India's airline industry is the third largest in the world in terms of passenger ticket booking
and is growing at an annual rate of 11%. India has 91 international carriers, 5 of which are
Indian and 86 of which are foreign, ensuring that India is well connected with most major
countries. The airline industry serves as a backbone for international travel and tourism, as
well as national and international supply chain logistics.
Until the late 1990s, Indian airspace was primarily controlled by public-sector enterprises,
but there has been a gradual shift toward the private sector. According to the Indian
government's budget for 2021, the privatisation of its airline behemoth, Air India, will open
the door for private players to participate in international trade.
To see the macro environment analysis for airline industry we will use the PESTEL model
analysis –
Political –
In 2017, the government launched the UDAN scheme to increase the number of
airports in the country, as well as Krishi Udaan to improve connectivity.
The government recently changed the upper and lower limits for the fares that airlines
can charge passengers, giving airlines a little more leeway.
Has permitted 100 percent FDI, allowing other major players to enter the market.

Economic-
According to the finance minister's budget, India is on track for a V-shaped recovery.
The country currently has a fiscal deficit of around 9%, which will take a couple of
years to recover from.
The cost of air turbine fuel has risen dramatically in recent years, reaching Rs.
90519/KL in Delhi.

Sociocultural-
Initially, there were travel restrictions imposed by COVID-19. As the restrictions are
lifted, people are adjusting to new norms and returning to the skies.
Aside from that, more people now believe that airlines are not too expensive and
prefer them to other modes of transportation.

Technological-
 Because of defence offset deals and increased FDI in the aviation sector, a large
number of technically advanced foreign players are entering the Indian market and
providing better technologies.
Also, as internet penetration has increased, airlines have provided a plethora of online
services, which are easily accessible to the general public.

Ecological-
The government and the NGT have established guidelines for airlines to follow in
order to reduce emissions. Furthermore, the government intends to reach the Paris
agreement soon, for which various sectors have been chosen, and the airline industry
will be a key player.
Airlines must focus on lowering emissions in order to reduce greenhouse gas
emissions.

Legal-
AAI has established guidelines for domestic and international flights in order to
improve operations. The Airport Authority of India is in charge of aviation
regulations.

b) What are some of the critical success factors for the industry?
Following are some of the key success factors for the airline industry:
• Structure
• Culture
• Strategic Alliances
• Planning and Forecasting
• Technology
• Marketing and Branding
• Outsourcing

c) Which tool would be the most appropriate to analyze the macro environment
and why?
The PESTEL analysis is one of the most effective tools for analysing the macroenvironment.
PESTEL, which stands for political, economic, social, technological, environmental, and
legal, is a trend analysis technique. This technique will provide a summary of all the factors
that affect the business. We can analyse all of the political changes that are occurring in the
macro environment, as well as the economic and social changes that are occurring in the
economy. Political changes are the ones that benefit customers more than airlines. This is
because the aviation industry is the one where passenger safety is prioritised. We can analyse
the changes or new technology that drives the business that have been introduced because
technology is the major aspect that drives the business. We can use this technology to help
our business. Environmental changes are a major factor in the airline industry, and we can
use the PESTEL analysis to analyse them. Along with these legal changes, a key factor that
drives the business can be analysed using PESTEL analysis.
d) Analyze their impact on the airline industry and the firm?
The airline industry was much challenged in recent years. Impact on the airline industry and
the firm can be analyzed by applying Porter's five forces, which are as given below:
1. Power of Buyers: As demand rises and online ticketing and distribution systems emerge,
buyers will no longer be reliant on agents and other intermediaries to meet their needs.
The market prices will fluctuate based on the market situation and other factors, resulting
in the purchase of tickets through multiple channels.
2. Power of Suppliers: Aircraft is driven by three principles: fuel, aircraft, and labour
employed in its construction, where the external environment plays a significant role, as
aircraft prices are affected by various other factors such as changes in oil prices, etc. If
there is a demand for aircraft, Airbus and Boeing acting as a duopoly as inputs required
from suppliers acts as a mainframe if an airline industry wants to thrive in the future.
3. Barriers to entry: A significant amount of capital investment is required for an airline
industry to enter the market; it is not possible for everyone to enter, which also
necessitates extensive knowledge. The same is true when exiting the sector, as it will
result in some losses.
4. Threat of Substitutes: Many airlines in India are becoming competitive through
frequent discounting, as each firm tries to gain an advantage over the others. Apart from
lowering the fares, we can also consider complementary services such as Wi-Fi, free
meals, seat preferences, and other amenities.
5. Industrial Rivalries: As previously stated, the Indian airline industry is highly
competitive in nature, especially when it comes to providing low-cost fares and other
services to customers, and is highly reliant on the supply side rather than the demand
side, which clearly means they have no choice in which markets to operate and regulators
are controlled by it.

d) Identify major sources of information to monitor these trends?

In the age of social media, which is largely unregulated, illicit information can quickly
spread. Rumors and fake news have spread like termites throughout the information space. In
this case, relying on certain reliable and government-approved sources is critical.
1. Industry Trend Experts and Blogs: There are internet influencers who gather
information from reliable sources and post it on a single platform. This way, the right
trends are propagated, and industries benefit from them.
2. Reports from Ministry of Statistics and Program implementation: These reports are
critical in the formulation of private-sector policy. They collect data via census, filter
junk, and ensure data integrity in all aspects.
3. PIB Articles: The Press Information Bureau publishes PIB articles that students use for
Civil Services Preparation. These news articles are about long-term and short-term
government endeavours and plans. The Ministry of Information and Broadcasting
controls and monitors them.
4. Ministry of Civil Aviation Website: This platform provides free access to everything
related to aviation. It contains all of the central government's policies concerning civil
aviation issues, security threats, and the steps taken to address them.
5. Customer Surveys: Some information can only be obtained firsthand through customer
surveys. This assists businesses in reading the minds of their customers as well as niche
requirements and issues. Understanding how the company can expand through various
demographics and across the customer requirement spectrum is also important.

e) What are the risks and challenges ahead?

The major risks and challenges which the aviation industry may face in the future are as
following:
Technology and Infrastructure-
Airport projects are on the rise, but they are long-term investments that require many
financial cycles. In addition, aircraft engines require maintenance and lubrication,
which increases the cost burden on aviation companies.

Managing the supply chain-

With such a large network of suppliers, minor errors and delays can set off a chain
reaction, causing budgets and schedules to spiral out of control. To meet demand, the
entire supply chain must increase its efforts and investments, ensuring timely
deliveries while maintaining high quality and keeping costs somewhat under control;
a difficult task that could leave many suppliers financially vulnerable.

Slow innovation-
Because innovation and modification are so expensive, they are never a viable option.
The time required to recover the costs is lengthy, and investors are sceptical.

Fluctuating oil prices-

The aviation industry's main source of risk has been the volatility of fuel prices. Fuel
price increases and decreases have a significant impact on budgeting decisions.
Because the Indian market is highly elastic, revenue drops precipitously as airline
costs rise.

Rivalry among competing firms-

Because there are already firms in the market where customers go for low-cost
tickets, it will be difficult for the firm to come in and establish itself while also
offering low-cost tickets. Otherwise, it will be difficult for the company to compete.
People can already get cheaper tickets on airlines like Air India and Indigo.
 Threat of new entrants-
This is not a major concern for the company because government regulations make it
simple for new players to enter the aviation market. The only thing they need to do is
follow the rules and provide facilities.

Supplier bargaining power-

The firm has a disadvantage in this because the number of suppliers is limited, such
as boieng, so they have more bargaining power.

Bargaining power of buyers-

Again, in this case, people play the role of buyers with more options. As a result, this
is a risk for the firm because power is in the hands of people who can switch to a
different firm when a low-cost ticket is required.

Threat of substitute products-

Because there are already many players in the market, this will be one of the firm's
major competitors.

2. Read the following situation and answer:

Jupiter Bio-Tech Ltd., an Indian Pharmaceutical firm is planning to enter the

Brazilian market by collaboration with Pharma Brazilia Inc. It proposes to market
psychotropic drugs in the Brazilian market immediately. Within one year the Indian
firm will be imparting technology to the Brazilian firm to manufacture a variety of
drugs locally for both domestic and international consumption. Though an MOU has
been signed between the firms, the Indian firm wants to investigate the Brazilian
environment and pharmaceutical industry thoroughly before any investment is made
or any effective steps are taken.
a) Please outline the scope of work involved in an environmental and industry
analysis of the Brazilian situation. (Make relevant assumptions as necessary)
The Brazilian pharmaceutical industry ranks among the world's top pharmaceutical
industries. During the recent COVID-19 scenario, we saw the importance and rise of this
industry.
We have been tasked with conducting an environmental and industry analysis of the given
situation. For industry analysis, we employ Porter's five forces model, and for environmental
analysis, we employ the CAGE framework.
Industry Analysis - To conduct an analysis of the industry in which the industry currently
exists, we employ the Porter's 5 forces model to gain insights into industry norms as well as
competitor behaviour. It is a tool used to determine whether or not an industry is appealing.
If the combined effect of all the factors does not eventually reduce the industry's overall
profit, it is considered to be an appealing industry.
The steps to be considered in the Porter's 5 forces which revolve around the industry analysis
are:
1. Threat of New Entrants - This factor is concerned with the state of new firms or
organisations entering the market. These newcomers to the industry hope to take over the
market share of the existing companies. This threat to existing players is multiplied
manyfold if a new entrant arrives with a large cash flow and brand identity. In this case,
more entrants are expected to enter the Brazilian pharmaceutical industry. Also, the
merger of Jupiter Biotech Ltd and Pharma Brazilia Inc. intends to begin production
immediately and, within a year, to expand its business into both the domestic and
international markets.
2. Threat of Substitutes - This addresses the possibility of competition that a firm must
face or is likely to face if it is to withstand an onslaught of substitutes. Because the
merger in the case is new, it will face stiff competition from existing Brazilian
pharmaceutical firms. It must also be in constant competition with other major
international players in this industry.
3. Bargaining power of buyers - This essentially deals with the bargaining or purchasing
power of the customer's buyers. It is essentially more if users or buyers have a variety of
options from which to purchase a specific product. According to the facts of the case,
this pharmaceutical merger will have an impact on both the domestic and international
markets. Buyers will have a variety of options from which to purchase the product.
However, if different schemes are implemented, this bargaining power can be reduced.
Different brands have developed loyalty programmes in recent years in order to reduce
buyers' bargaining power.
4. Bargaining power of suppliers - This is concerned with the bargaining or selling power
of the organization's suppliers. These suppliers can include raw material providers,
labour providers, service providers, and so on. This also addresses the number of
companies that provide these services. The greater the number of firms providing these
services, the lower the suppliers' bargaining power.
5. Intensity of Rivalry- Brazil has a significant competitive advantage, particularly in
terms of demand conditions, related and supporting ventures, and competition.
Organizations that want to expand into new business sectors must have novel ideas and
encounters that can result from the expansion, as well as confidence in reinforcing its
image abroad and improving its base in the local market. Brazilian businesses are used to
dealing with difficult situations such as developing monetary and customer mentalities,
high management, complex financial and expense structures, coordination, and
vulnerability.

CAGE Distance Framework: The CAGE distance framework is an important strategic

tool that can assist us in identifying significant differences between various countries that
 companies or governments can consider when considering cross-border investments. The
framework can assess countries and calculate their distance from one another. This does
not necessarily refer to the physical distance between the two countries, but rather to the
figurative distance between their cultures, administrations, geography, and economies. In
the case of Brazil's pharmaceutical industry, cultural distance may not be as important,
but administrative distance will be significant because drugs and pharmaceutical
products are heavily regulated by the government. The geographic distance will also be
small, whereas the industry may face a moderate economic distance.

b) What is the information that you would need to conduct a competitive and
firm analysis and what frameworks would you use to conduct the analysis?

A competitor analysis framework, also known as a market analysis framework or

competitor analysis model, is a structure used by business professionals to research and
evaluate their competitors. In other words, it is the art of knowing your adversary.

The firm seeks to understand the following during a competitive analysis:

• What motivates the competitor, as evidenced by future objectives
• What the competitor is doing and what it is capable of doing, as revealed by its
current strategy.
• The competitor's perception of the industry, as evidenced by its assumptions
• The competitor's capabilities, as demonstrated by its strengths and weaknesses.

Understanding these four dimensions assists the firm in developing an anticipated

response profile for each competitor.

Gathering data and information that can help the firm understand its competitors'
intentions and the strategic implications that result from them is critical to conducting
an effective competitive analysis. In competitive analysis, the company gathers
information not only about its competitors, but also about public policies. In various
countries around the world. Such intelligence facilitates an understanding of the policy
intelligence's strategic posture, and the firm gains the insights required to make
effective strategic decisions about how to compete against rivals.

Firms must pay attention to complementors of their products and strategy when
gathering competitive intelligence. Complementors are businesses or networks of
businesses that sell complementary goods or services that are compatible with the
goods or services of the focal firm.

Competitive frameworks compile critical information, such as a competitor's business

strategies, products, offerings, marketing efforts, sales, and so on, into an organised
visual model that is easy to understand at a glance.
 The SWOT analysis can be used to evaluate a company's strengths and potential areas
for growth. A SWOT analysis is a method of assessing one's strengths, weaknesses,
opportunities, and threats. This analysis could be performed on a product, team,
organisation, leadership, or other entity. In many business environments, SWOT
analyses are used to gain a better understanding of how to plan for the future.

Analyses are employed in order to gain a better understanding of how to plan for the future.

The SWOT chart categorises information into four categories.

Strengths: Internal positive factors that affect a business are referred to as strengths. Internal
strengths include, for example, a positive workplace culture and highly trained employees.

Weaknesses: They are internal factors that represent an area for improvement or a
challenge. A new company, for example, may have a limited marketing budget. This is a
challenge that the company must face.

Opportunities: A positive external factor that represents room for growth is referred to as an
opportunity. For example, a new technology that could boost your online sales could be an
opportunity.

Threats: They are external challenges that a company must face. This includes both
competition and product costs. For example, if your company manufactures automobiles and
the cost of automobile parts is rising, this is an external challenge.

As part of a larger competitor analysis, many marketing teams conduct a SWOT analysis. A
SWOT analysis can reveal the number of competitors in the threat section. To identify trends
and gaps, a marketing team can conduct a market SWOT analysis and analyse the strengths
and weaknesses of various competitors.

c) Also specify the sources of information for the same.

Information Sources
1. Reports from the Brazilian Ministry of Health: Because we work in the pharmaceutical
industry, direct information from the ministry is critical. Relying on secondhand
sources can pose a risk.
2. Reports from the Pharmaceutical Manufacturers and Researchers of America
3. ProGenericos, the Brazilian Association of Generic Drug Manufacturers, issues a
Report
4. ANVISA The National Health Surveillance Agency, or ANVISA (Agência Nacional
de Vigilância Sanitária), is the Brazilian regulatory agency in charge of food,
cosmetics, tobacco, pharmaceuticals, health services, and medical devices, among
other things.