Marketing assignment on PESTEL analysis

The acronym PEST indicates the four main factors which might affect the functioning of the organization.Political:

The airline industry would be able to have good reputation, image, and success or trust unless & until it is unaware regarding the political status of the country or the economy as a whole. The airlines industry as well as the companies constituting in this sector shall be made sure regarding the political situation of the same. The airline industry as well as the companies constituting in this sector shall be prepared regarding the different issues which might arise in the political sector of the country (Smith, 2000). The airline industry as well as the companies constituting in this sector shall be made sure that it should accept or follow different types of laws of the country it is engaged in. The airline industry as well as the companies constituting in this sector shall be made sure that different local as well as international transportation laws shall be followed. The airlines industry as well as the companies constituting in this sector shall follow various types of air travel laws that would provide regulations for different things allowed for every flight.

Economic:

The airline industry as well as the companies constituting in this sector would be economically stable in the past many years. The economic status of the airline industry is doing fairly well & trying to improve the products which are given to its clients in order to make their flight satisfactory. The internal economic situation of airline industry shall not be taken into consideration but the economy as a whole shall be taken into consideration in which the airline is operating. The economy of the industry might be able to boost the sales of the products & services offered by the airlines industry. Due to the good economy of the country in which the airlines is operated, people shall have their financial resources in order to buy the products & services of the airlines industries (Porter, 2007).

Social:

The airline industry as well as the companies constituting in this sector makes sure that the products & services offered to their customers is duly accepted by the same. The airlines industry along with the companies constituting in this sector does not authorize the delivery of goods & services which can cause complains by the target group (Porter, 2007). The airline industry as whole along with the various companies involved in it are engaged in various social activities which would help in order to develop fair relationship between them & the client. These activities can be in the form of outreach programs and free tickets to special people.

Technological:

The airline industry consists of different types of technologies which would help in the introduction of the new concepts in relation to the airlines industry. Changes in technology would lead to high levels of affect over the airlines industry. The airlines industry, takes into consideration technology as one of the key aspects in their mind as changes in technology would either lead to rise in the overall industry or vice versa. This industry makes sure that, it is updated regarding any of the changes in the technology. They try to adjust their industry with the different types of technology (Smith, 2000).

Porter’s 5 forces Model:

The five aspects to be kept in mind while performing the five forces porter’s model for the airlines industry would be:

Þ    Bargaining power of buyers: The bargaining power of buyers is quite high in case of the airlines industry.

• There are many options available with the customers
• Low levels of switching cost available with the customers
• Standardization of the products & services provided by the airlines

Þ    Bargaining power of suppliers: The bargaining powers of the suppliers are also high as compared to the bargaining power of the buyers.

• There are only two suppliers in the airline industry i.e. Airbus & Boeing. Hence, the bargaining power is quite high.
• There is a least chance for the suppliers to bargain in case of the Airline industry.
• The levels of fuel which have been supplied to the airlines should be kept into consideration.

Þ    Threat from the substitutes: The threats from the substitutes are also high.

• There are many different airlines which are applicable in the same route. Therefore, the level of competition amongst the airline industry is quite fierce.
• The switching cost to shift from one airline to another is quite high (Porter, 2007).

Þ    Existing Competition: The existing competition prevalent in the airline industry is quite high.

• There are many competitors available in this sector
• This industry is quite sensitive to the various economic cycles.

Þ    New Entrants: The last aspect to be kept into consideration refers to the threat from the new entrants. There are low levels of threats from the new entrants.

• The profit margin in case of the airlines industry is quite low (Porter, 2007).
• The products & services offered by the different airlines is almost the same. Therefore, it is a difficult task to differentiate amongst the same.
• The upcoming aircraft must fulfill the various policies, regulations, etc (Smith, 2000).

Life Cycle:

The life cycle of the airline industry has been discussed in this part of the assignment. The life cycle of a particular industry passes through various categories. There are four stages within the lifecycle of a particular industry starting from introduction – growth – maturity – decline. The first stage in the airline industry takes into consideration the venture capital or the capital requirement of the same. In the airlines industry high levels of capital would be required which would help in the smooth functioning of the entire sector. Once the airline industry has high amounts of capital with them, the industry tends to grow in the future years to come. In this stage of the life cycle, the airline industry is expected to grow at a high pace. After this stage has been accomplished, the maturity stage takes into consideration. In this stage of life cycle, the products or the services offered by this industry is accepted by the public. In this stage, the airline industry is entrenched in the economic mainstream (Porter, 2007). Their products, brands, services, distribution channels, etc are well established within the market & the minds of the customers. Within the maturity stage of the life cycle, the airlines industry would reach up to a level at which the customers would be able to attain competitive prices, replace as well as update the sales to have economic growth. In the last stage of life cycle, the airlines industry would be in the decline stage. In this stage the airline industry, would be flooded with new competitors, price deterioration, differentiation amongst the products & services offered by the same, use of different technology, eliminate the entry barriers as well as diminish the levels of profitability. It has been seen that, airlines industry would have steady or declining expected earnings.It has been stated that, the airline industry has its own life. After the invention of the airline industry, it provides the people with different types of products & services which help to meet the needs of the customers. It has been well stated that, the life cycle of the airline industry begins or introduces with the capital stage where in the goals as well as the purpose of the industry is being done. This refers to a stage where the industry initializes its plan of action as well as adjusts the different players & factors amongst the environment. After the introductory stage comes the growth stage. The growth stage in case of the airlines industry is quite high. In this stage, smooth entry of the airline industry is being done. In the third stage, the products & services offered by the airlines industry is kept into consideration. In the maturity stage, a fair relationship between the airlines industry & the clients is established. Amongst the last stage i.e. the decline stage, the airline industry would be encountered with high levels of problems which might have affected the growth of this industry. Each & Every stage of the life cycle in case of the airlines industry would take into consideration different strategies which would in order to resolve the problems encountered by the same.

SWOT Analysis:SWOT analysis would be referred to be one of most reliable strategic marketing tool which would help to highlight the Strengths, Weakness, opportunities &Threats of the airline industry.

Þ    Strength: One of the major strengths of the airline industry has been referred to the product i.e. “Air travel” itself. Despite of the various downfalls in this industry, air travel continues to grow in the future years to come. The increase in the overall industry is not just due to an increase in the population but due to an increased propensity to fly. The major strengths which have been associated with airline industry are in regards to the level of safety as well as the speed attached to it. The entire staff in the airlines industry starting from pilots to ground level people to flight attendant to stewards is highly trained & experienced.

Þ    Weakness: One of the major weaknesses attached with the airline industry is the high spoilage rate as compared to the other industries. It has been noticed that, once the flight takes off a vacant seat is lost & there is no amount of revenue generated by the same. Airlines have been regarded as an expensive venture & attaches high levels of capital with it. The return on investment which is achieved is different as compared to what is planned. When the climate changes quickly, it is quite difficult for the airlines industry to make quick decisions & schedule the entire aircraft accordingly.

Þ    Opportunity: The airline market is growing at a very high rate. The opportunities attached with such an industry is expected to rise in the future years to com. The airline industry has a high growth rate which leads to expansion in both leisure & business destinations. Advancements within technology would lead to high levels of cost savings. The entire process aircraft might change from a fuel efficient aircraft to an automated process. With the advancements in the aircraft, high levels of revenues could be generated. Changes in technology would also help in providing customer friendly enhancements & other added services to its customers.

Þ    Threat: The threats which have been associated with airline industry refer to the economic downturn which would affect the leisure as well as the business travel. The fuel hike refers to the cost for many airlines. Terrorist attack anywhere in the world negatively affects the air travel. Intervention of the government would lead to new results as well as an unexpected competition in the international market.

3 Generic Porters Strategies:

The three generic porter’s strategies which have been used by the airlines industry have been discussed in this section of the report. The three strategies are:

Þ    Cost Leadership

Þ    Differentiation

Þ    Focus

Cost leadership:

The airline industry has made many attempts to become the low cost producers in this particular industry. Therefore, the cost leadership strategy has been followed in this sector which has made the airlines cost effective amongst all other sectors. It has been seen that, companies with low fares will be able to earn high levels of profits when the products are undifferentiated & are selling at standard price. All those airlines within this sector mainly emphasis upon cost reduction within the various activities covered in the value chain. One of the major risks attached with the reduction in the cost has led to the reduction in the varied costs at an expense of certain factors which might lead to the loss of vision of the same.

Differentiation:

Differentiation refers to the second generic strategy which would help the airlines to be different from one another on the basis of various aspects such as services, cost, speed, quality of food, cleanliness, customer satisfaction. It has been argued by Porter that, differentiation has been taken place by the airline industry & the company is ready to take up different types of costs. Some of the additional costs which would be incurred would be in terms of aggressive advertising, spend more to differentiate the product, build brand image, etc.

With the help of differentiation, the airlines industry would have various types of advantages which would be quite useful to make a strategy as well as implement it. One of the major risks involved with differentiation would be premium pricing for the customers in order to recover all the expenses incurred by them. It must be seen that, differentiation strategy would be referred to as one of the ways with which more customers would be attracted towards one another.

Focus:

The last generic strategy discussed by Porter refers to have proper focus regarding the above mentioned two strategies. The companies in the airline industry have employed this strategy by focusing upon the various areas where there is less competition. Airline sector has used the focus strategy in order to focus upon the niche markets & offer them new products for that particular sector. This strategy would help in order to achieve the targets set by the airline industry.

This porter’s generic strategy for the airlines industry would help to charge high prices for the superior quality of the product offered by the same. It has been discussed by Porter that, many of the premium priced airlines cover a small part of the worldwide market. This means that, niche market strategy has been followed by the same.

Ansoff Matrix:Ansoff Matrix refers to a strategic marketing tool which would help the airline industry to decide upon the product as well as the growth of the entire strategy. Based upon the Ansoff Matrix, the airline industry would be able to grow as well as depend upon the fact that whether the markets is in new or existing products or the products is new or existing markets.

                                                 (Source: Porter, 2007)

Þ    Market penetration:

Market penetration has been practiced by the airlines industry in order to grow within a particular business by selling the existing products within the existing markets.

With the help of market penetration four main objectives would be achieved. They are as under:

• To secure a position within the airlines sector
• To maintain high levels of market share with the existing products or the offerings. This can be done with the help of the various factors such as competitive pricing, advertising, sales promotion methods, etc
• Restructure the market by driving out the competitors who would help in order to practice various promotional campaigns as well as design the markets in order to attract the unattached customers as well.
• Increase the levels of existing customers by introducing various schemes for their loyal customers. To penetrate within the market by utilizing the various strategies as well as focus upon the products offered.

Þ    Market development

In case of the airlines industry market development has been practiced where the business seeks to sell their existing products into the new markets.

Some of the strategies which have been implemented by the airlines industry are discussed as under. They are as follows:

• New channels of distribution
• New products
• New geographies to be targeted
• Differential pricing has been followed by the airlines industry in order to create new market segments

Þ    Product development

Product developments have been practiced by the airline industry in order to grow it with the aim to introduce new products within the existing markets. Though this strategy majorly requires the development of a new strategy to launch a new product & develop a modified product which would meet the increasing demands of the society.

Þ    Diversification

The airline industry has been using various types of diversification strategies which have helped them to grow with the launch of new products by focusing upon the new markets. With the help of differentiation, the airlines industry would have various types of advantages which would be quite useful to make a strategy as well as implement it (Eng, 2012). One of the major risks involved with differentiation would be premium pricing for the customers in order to recover all the expenses incurred by them. It must be seen that, differentiation strategy would be referred to as one of the ways with which more customers would be attracted towards one another.

Successful Company who face Icarus:Air Asia has been referred to as one of the most successful Malaysian low cost airlines. Air Asia is the Asia’s low fare, no frill as well as a pioneer low cost travel in Asia. Air Asia has been regarded as one of the airlines which have expanded abroad in quite a short period of time. Air Asia has unrevealed many five year plans in order to enhance its presence all across Asia.

In the recent years, it has been seen that various issues relating to Icraus Paradox came into picture. It has been seen that, eight months from now there was a deep controversy between MAS & Air Asia relating to the Swap ratio.

It was reported that, MAS would swap 20.5 % in the overall stake in Air Asia. High levels of loss were reported. In the year 2011, RM 2.52 billion was the loss which incurred for the airline. One more issue relating to Icraus Paradox which is reported is in regards to the failure to disclose full price fares of Air Asia (Agence France Presse, 2012).

Air Asia has been slapped with the lawsuit by the regulators in failing to disclose the full prices of the fares of the tickets. It was reported that, Australian Competition & Consumer Commission claims that some of the tickets did not disclose the prices inclusive of taxes, fees, duties, etc.

Recommendations:Some of the recommendation for Air Asia has been discussed in this section of the report. They are as follows:

Þ    As a whole there need to more involvement of the administrative sciences which should be envisioned in better formulation (Eng, 2012).

Þ    The airlines should show the diversification which will help in giving better knowledge and output regarding more remote transportation, holiday packages, music and entertainment while boarding the flight.

Þ    Major focus should be given in sectors like cost, focused differentiation and leadership style. In order to determine how airline can pursue with the integrated cost and achieving different level of business performance (Amit & Schoemaker, 2003).

Þ    Further the most importantly the marketing strategies and the research and development team should formulate different strategies that which will help out in giving benefit to the airline industries (Barnety, 2001).

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