BUSI-1630 Report: Strategy for Managers

Introduction

This report will focus on a case study based on Air India airlines. The case study will be
comprehended and then evaluated into 3 sections which will sum up the companies position in the
industry. Firstly, we will focus on strategic position and to understand this, we will use the Porters 5
Forces model, SWOT and PESTEL models. Then we will look at the strategic choices that can be
implemented for Air India using a few models. Lastly, we will look at strategy in action which is how
this company will use these new ideas and the way this will be planned.

Strategic Position

This section will solely be based on the three models that will comprehend the status of Air India in
the industry. The 3 models that will be used are SWOT, Porter’s 5 forces and PESTEL. These models
will sum up and evaluate the company’s position.

Porter’s Five Forces of Power PESTEL analysis

Competitive rivalry - Air India have a few rival
companies. They face competition from carriers
like Indigo and Spice Jet who are low-cost
carriers (LLC). There is domestic competition
like Jet airway and international competitors
such as Qatar airways, emirates, and the
Etihad. The competition is quite weak due to
passenger load factor (PLF) when looking at
other Indian carriers. Low-cost carriers (LLC)
like Indigo and Spice Jet show stronger
passenger load factor (PLF) with indigo on 81%
and Spice Jet on 97% which is the highest. Air
India hold 76.1% which is weaker than others.
In addition, Air India have a market share of
13.3% which is relatively weak when looking at
Indigo, who stand at 39.6%.
Political –
In India, the government has put out an
opportunity for its people to become
consumers of airline transport. People in tier 2
and 3 cities will have the chance on fly to other
cities of India as other carrier location will open
up. This will also be an opportunity in financial
gains for airlines as now there will be entry for
new consumers (Joshi,2021).
In the aviation operation, there is a slight of
endangerment due to the economy and the
way they shift oil and fuel prices as these fossil
fuels will only get more expensive
(Saraswati,2001).

Threat of new entrants – The first threat for Air Environmental –

India would be entry to new carries which can
cause a rivalry with Air India. Pupils with
outstanding funds may want to enter the airline
industry which can force competition. This
threat, however, is very low due to the
unlikeliness of someone with stable funds to
start the company up and if the company was
only to establish now, the status of the airline
will be in shadows compared to other
experienced airlines unless it offers a unique
edge.
The open skies policy that was arranged will be
a key threat to Air India allowing other Airlines
Green flying is initiated for the airline so that
environment friendly flights become a norm for
Air India. On the other hand, this type of
institute will be expensive especially for this
company that has much bigger competition
(NASA,2013).
Climate change is something that many
industries will face especially the aviation
industry. With fossil fuels being a finite
commodity, Air India will have to look for other
across the globe to fly to other national
carriers. This policy manifests liberalisation and
access to national airports and foreign airlines.
The regions hub has growth potential following
up the policy, with tourists’ numbers also
having a chance to increase due to the strategy.
Threat of Substitution – People would look for
alternative services such as rail and road
services that offer a much convenient and
affordable option. With ticket prices for airlines
enlarging, it shows that the substitution could
gradually become rail and road services for
people and would show signs of market share
decrease as there is a difference in ticket prices
when comparing to airline tickets and railway
tickets.
Bargaining power of suppliers – Suppliers that
Air India face would be labour unions. They are
a strong force as they view the pliability and
performance of the industry. Aviation fuel is
what Air India use. The prices for this type of
fuel can fluctuate and change because of OPEC
which is a Geopolitical organization of the
Petroleum Exporting Countries.
Bargaining power of buyers - Bargaining power
is a strong force due to the decisions that
consumers make. It all depends on the
consumers decision on choosing an airline.
They tend to look for the affordable prices that
will not take up all their funds. Other things
could be reputation of the company based on
features, safety etc. If looking at the case when
Air India plunged 158 passengers lives in the
2010 crash, the status of the company took a
hit in status (BBC,2021). This is because of the
uncertainty it is giving for consumers giving
other competition the chance to match its
prices and provide a much safer experience.
environmentally friendly and fuel-efficient
ideas.
Social –
Labour markets have a restricted flexibility just
like the cost of capital and a shortage of pilots,
therefore.
A social problem that Airs India had to face is
the deaths of 158 passengers that left a lot of
people questioned (BBC,2021). This type of
unwanted information left Air India with a
downgraded status and because of this, the
passenger load factor would decrease. Profit
fell gradually.
Technological –
In terms of technological growth, Air India
provide various types of ways to make
customer experiences much easier such as
customer complaints understood via live chat,
cancelling flights on the internet, booking
tickets via internet.
Economical –
As fossil fuels are a finite resource, it is only a
matter of time this method of energy will go in
addition, this will just increase fuel prices as
this resource will slowly disappear. Profits will
just become much harder to attain.
Expansion of Air India does show opportunity
to locals with various other job offerings
opening up and it can give opportunity for
other national citizens for work as expansions
will grow across the world for Air India.
Legal -
Various laws are implemented upon Airlines
based on how they serve their passengers and
safety precautions.
Air India have been facing litigation risks due to
the breach of passenger databases. This
litigation could slow down the privatisation of
Air India and with this law slowing down their
growth.
SWOT analysis
Strengths
• Radixx International is a reservation
system that is used by big airline
companies such as Go Air and because
Air India have implemented this, they
get the competitive edge against
others.
• Cheap ticket prices because of the low-
cost methods Air India apply.
Opportunities
• The main opportunity is expansion in
other various parts of the world
starting off with Asia. The methods
they implement for cheap flights will be
the edge they get against their
competitors.
Weaknesses
• The main threat is the incident that
occurred in 2010 which left 158 lives
dead as there was a crash and Air India
lost consumers because of this. The
fear of not trusting an airlines safety.
Other competitors will have the
advantage.
• Fuel prices have increased which will be
difficult for companies such as Air India
to produce profits (Georgiadis,2021).
Because the use of premium pricing in
fuel, it will be difficult to make a profit
margin.
Threats
• It will be difficult for the company to
expand because of the policies that are
placed against airlines which is a limit
to staff recruitment.
• Other competitors have a competitive
edge because of their Passenger Load
Factor and to overpass this will be
difficult because of the status other
airlines hold and consumers hold
loyalty.

Strategic Choices

The position of Air India has been shown in the models above, but the report now will focus on the
strategic choices Air India can make to expand. Porters generic and hybrid strategies will be used to
fulfil this. The first idea I would like to come across is improving their database by including new
programs such as loyalty schemes. The reason why Air India will benefit from this is because, there
will be a growth in consumers as they will offer comfort and different price ranges for the loyal
consumers which will attract new customers. The case study set in 2016 shows Air India lack
customer appreciation with many issues arising such as last-minute cancellations, refunds, and poor
services. The loyalty scheme would give consumers much better treatment thus bringing in fresh
face consumers. They have included “unmatched point-to-point connectivity, convenient schedules,
low fares with meals and on time departures” on the other hand, a unique loyalty scheme would add
more beneficial success for the company with new up roaring schemes. It will show why this airline
is unique when compared to competition. This strategy is called, differentiation. This strategy makes
a product more distinguished and rarer to its competitors thus leaving consumers to open new
doors to new ideas (Sharp,2001).

Another idea to expand Air India would be investing into the IT and digital market. Significantly, they
should focus on creating Analytical approach methods for decision making, using data in a much
smarter and efficient way with some investments, but good payoffs. This will help improve the Air
India as they think ahead with technology growing rapidly, it can only benefit when implementing IT
and digital systems to the company. This strategy is called the Ansoff Matrix strategy. This is when
the company’s market strategy relates to the strategic decisions it must make (Loredana,2017). This
helps the company expand whilst trying to enter new markets and ideas. As case study shows, Air
India’s rivals that implement low cost carrying (LLCs) using code sharing and this is when two airline
companies connect each other’s services to gain predicted profit. These choices will allow Air India’s
passenger load factor to increase as they are using new database ideas. This new market will give
them the advantage to see their overview of things such as revenue, profit margins or even
passenger load factors (PLCs).

The third decision to evolve the company would be improving staff and recruiting more experienced
workers. The reason why this decision should be made is because Air India is not so well established,
the key workers are not holding the same expectations as the company does which is to expand.
Looking back at the case study, there is a statement that shows “poor services” of Air India airlines,
and this can only be focused on the staff and how they provide comfort to the consumers. This could
suggest that they are not experienced in some consumer encounters. This idea will benefit them as
they will be looking for workers that worked in much bigger companies such as Qatar and Etihad
Airways. These ex-workers will show much more connection with the consumers and handle them
with care. The focus strategy will be implemented for this. This strategy allows a smaller firm to
focus on a couple significant target market to then tailor to them. The competitive edge it has is not
for efficiency but for effectiveness (Tanwar,2013).

Lastly, the fourth strategic choice to implement expansion would be keeping low-cost prices but still
expanding as an airline industry and improving comfort and care for its consumers. To implement
this idea, Air India will have to pull ideas out of their competitors which can link to the other strategy
of providing experienced staff that used to work in big airline industries thus, allowing them to
provide data that will bring ideas to Air India. This will help them come up against bigger airlines as
their status and consumer experiences will improve. They can begin with the revenue that they have
to improve on resources only spending significant amount of budget. In 2020, Air India’s revenue
came to 285 billion rupees (statista,2020). The strategy used in this case is cost leadership strategy.
This focuses on creating a no-frills product which is given to a high volume of consumers for a low
price. The main goal then is to search for reducing costs in different aspects of the company
(Tanwar,2013). In the case study, Air India India’s domestic routes reach 277.1 kilometres which is
relatively small in comparison to its competitors. Cost leadership strategy will help expand this.

Strategy in Action

5=best, 1=worst

Strategic Choice Suitable Acceptable Feasible Total Score

1 3 4 4 11
2 5 4 5 14
3 4 5 3 12
4 4 5 4 13
Suitability – The second strategy would be most suitable reason being the database collected will
then allow to understand the status of the company and issues. Choices three and four get the same
score as these are the identified issues that naturally need to be fixed. Lastly, the first choice can be
used to implement expansion of consumers when other issues are figured out.

Acceptability - Choices 3 and 4 have the highest score due to these issues already being identified
and it is correct to start with them. Choices 1 and 2 got second lowest and shows that there still
needs to be some digging in those fields as the issues has not been identified just yet.

Feasibility – Choice 2 gains highest due collecting database and finding solutions will be relatively
easier. Choices 1 and 4 have the second highest because this will take a period to implement and to
see results. Choice 3 got the lowest as we want to appeal highest level of recruitment and some
adjustments will need to occur.

Total - Choice 2 is the highest because it holds importance in finding out the status of the company,
so database is an important aspect. This will show where they are at right now before they could
begin any other improvements. They need to first understand its structure. On the other hand, it is
limited to things such as timeframes of finding database as there is a lot to look from.

Conclusion

In summary of this report, the airline industry is very a very complicated market that will be difficult
for anyone who are trying to build their own airline. Air India show a prospective future for
themselves if following ideas suggested above, they can reach levels of big airline companies. This
report covered a brief look of porters five forces, PESTEL and SWOT analysis of the company. Next,
the focus was on Porters generic and hybrid strategies. There was another strategy used which was
the Ansoff Matrix strategy. Overall, this company has the performance and capacity to gain great
status thus giving it a chance to be an international airline company competing with the best.

References

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3. Joshi, 2021. What Is India's UDAN Regional Airport Development Scheme?. [online] Simple
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2021].
4. NASA, 2013. NASA's Green Aviation Research Throttles Up Into Second Gear. [online] NASA.
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5. Hindu, 2021. Breach of Air India data poses litigation risk for airline, experts say. [online] The
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2021].
6. Sharp, B., 2001. (PDF) What is Differentiation and How Does it Work ?. [online]
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_Does_it_Work> [Accessed 14 December 2021].
7. Loredana, 2017. [online] Utgjiu.ro. Available at:
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[Accessed 14 December 2021].
8. Tanwar, 2013. [online] Sswm.info. Available at:
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<https://www.statista.com/statistics/587955/financial-performance-air-india/> [Accessed
14 December 2021].