VI. STRATEGY ANALYSIS
A. SWOT Matrix (TOWS)
Recommended strategies
Market penetration strategy seeks to increase market share for present products or services in present markets through greater marketing efforts. This includes increasing the number of salespersons, increasing advertising expenditures, offering extensive sales promotion items, or increasing publicity efforts. Product development usually entails large research and development expenditures. In airline industry, the company always pursuing product/service development, because customers increasingly are willing to pay more for the products and services with excellent facilities or technology
External Opportunities:
· Facilities are better compared to other airlines. A great facility is a big factor for customers in choosing an airline. With this new market trends, there’s a big potential opportunities for Philippine Airline to be the number one.
· Promos during peak season. Family and barkadas usually go out and have fun during holidays. Philippine Airline can offer a promos and discounts for their customers.
· Increase in tourism industry. Tourism plays an important role for the growth of the country. This is a great opportunity for PAL to offer their services for customers.
· Increase in the number of overseas workers. Today, there are many Filipinos who go out of country looking for job. PAL is committed to show a quality services for them.
·
External Threats:
§ Wide variety of promos offered by other airlines. Other Airlines offer promos lower than the PAL. PAL goes for fair fare with a quality service.
§ New entrants in the market. For an entity who wants to engage in airline industry, they must first understand its customers. PAL continues to be a customer-oriented company.
§ Terrorism. Terrorism affects the tourism in our country. Passengers might be afraid of traveling.
§ Ongoing economic crisis. The economic crisis has a big impact in airline industry. The passenger traffic decrease. Many airlines reported loss because of hedging costs and fluctuation of fuel price.
§ Increase in airlines’ maintenance costs. Cost of operating more flight means a higher maintenance costs. PAL’s expenses exceed their revenue.
§ Employee strike due to potential lay-off. PAL is in the process of restructuring and reducing their costs. Thousands of employees and their family are affected. Also, it can give an idea to the customer that their quality service might be compromised.
§ Ban from European Union. Because of ban, the flight of the PAL in the west is affected. PAL can’t add flights nor use their new and fuel efficient planes to other countries.
§ Continuous increase of fuel price. Airlines are dependent on the fluctuation of fuel costs. Since fuel is one of the largest costs to PAL, a slight change in price affect the difference between a loss and a profit.
§ Labor cost. Aside from fuel, labor costs are one of the largest costs of Philippine Airlines. Without well-trained and excellent employees, PAL may not be known at all.
Internal Strengths:
§ Employee morale is excellent. Each employee undergone a training to improve their skills and to develop their attitude. Attitude is important for them to gain respect and trust from the customers. PAL is committed to deliver excellence which enables them to carry out a quality service to their customers.
§ Image is highly recognized. PAL is a well-known international airline that started in 1941. Its brand has several unique elements that have helped them create a special bond with their customers.
§ Modes of reservation. PAL has a 24-hour phone-in service and they can inquire through the internet.
§ Customer service. PAL is indeed known for their quality services. Customers keep on coming back to PAL because they are provided with comfort and safe trip.
§ Maintenance and convenience. It is an added strength to the company. PAL performs an outstanding quality of customer service.
§ User-friendly information system. Looking through website instead of going to their office is a great convenience for customers. Simple and easy to navigate.
§ Availability of Electronic Ticketing System. Before, the customers had wait in line at the ticket office to get their ticket. Now, PAL enhanced its service by allowing customers to receive their ticket thru fax or email without leaving their home or office.
§ Special discounts and promos offered. PAL offers special discounts and promos all year round, domestic or international.
§ Asia’s oldest carrier and still operating under its name. Even if it is greatly affected by the economic financial crisis, PAL is able to return by striving harder and they still continue to serve their customers.
§ Flagship carrier of the Philippines. PAL brings pride to the Filipinos on all the places they touch down.
Internal Weaknesses
§ Expensive fare. PAL equates their fare with the service they provide. The fare is depends on the fuel, maintenance costs and the flight schedule.
§ Space and transportation for cargoes. There are limitations in the cargoes as defined in their legal notice.
§ Space in arriving area. Space in the arriving area at the airport is limited.
§ Limited advertising. Advertising is one way of showing to people how committed is you. Some people might not be aware of what PAL can be capable of.
§ Not part of an international alliance. International alliance is an agreement between two or more airlines to cooperate at substantial level. PAL can have a benefit and also its passengers.
§ Delayed flights. This is what the passengers hate the most. Sometimes, it can’t be helped when it involves fortuitous event. PAL is striving to meet the customer’s issues and resolving it in shortest possible time.
B. Strategic Position and Action Evaluation (SPACE) Matrix
INTERNAL
FS = (4 + 5 + 6 + 3) / 4
= +4.5
CA = (-1 + -3 + -3 + -1) /4
= -2
EXTERNAL
ES = (-2 + -2 + -3 + -4) / 4
= -2.75
IS = (3 + 6 + 5+ 5) / 4
= +4.75
BASIS: IFE and EFE
CONCLUSION: X axis = (IS + CA) = 4.75 – 2 = + 2.75
Y axis =(FS + ES) = 4.5 -2.75 = + 1.75
SPACE (Strategic Position and Action Evaluation) Matrix
CONSERVATIVE
AGGRESSIVE
C. BCG MATRIX
To understand more the market situation faced by our product and company, we should understand its relative market share in its industry. We decided to use a BCG (Boston Consulting Group) Matrix for this reason.
By understanding our product and company’s market share, we would learn the strengths and weaknesses of our product and improve it squarely.
Star
- Philippine Airlines International Flight services fall under star because 80.90% of the transport revenues of PAL comes from this division. Also, it has the most passengers throughout the competitors here in the Philippines. It has expanded its foreign destination from 30 to 33, 25 on-line points and 8 points under joint service/share code arrangement. The domestic network covered 18 cities and towns in the Philippines.
- Philippine Airlines On Flight Services fall under star because the airline provides a complete cabin interior which gives a comprehensive aircraft cabin, bannered by its reconfiguration from a tri-class to bi-class layout. The airline also provides cabin amenities, entertainment, meals and beverages, duty free sales and most of the entire airline make sure the safety and comfort travel of their passengers this was best evidenced by the IOSA an accreditation given by the International Air Transport Association and a 3-star rating awarded by Skytrax.
Cash Cow
- Philippine Airlines Cargo services fall under this cash cow because the cargo services of the airline do not have promotions and placement. Because of the low growth of the airline, promotion and placement investments are low. If there will be investments into supporting the cargo services the airline can improve more efficiency and increase cash flow
Question Mark
- Philippine Airlines Domestic Flight services fall under cash cow because currently the market share decrease from 50% in May 2009 to 35.4% where in 19.1% of the transport revenues of PAL comes from this division. It has expanded its domestic destination from 20 in 2007 to 29 currently. Providing a potential increase in its market growth.
D. INTERNAL-EXTERNAL MATRIX
IFE Total Weighted Score = 2.97
Internal- External Analysis
Based on the EFE and IFE matrices in the previous chapters, with the resultant scores at 2.56 and 2.97 respectively, the combined effect of the external and internal analysis falls in cell V for IFE TWS of 2.91 and EFE TWS of 2.65.
This IE Matrix of Philippine Airlines tells that the company should hold and maintain. The company should pursue Intensive strategies such as Market Penetrationand Product development which is the best and most appropriate things to do. They must increased market share for present services in present markets through greater marketing efforts, introduce present services into new geographic area, and increased sales by improving present products or services or developing new ones.
E. Grand Strategy Matrix (GSM)
1. Market Development
2. Market penetration
3. Product development
4. Horizontal Integration
5. Divestiture
6. Liquidation
1. Concentric diversification
2. Horizontal diversification
3. Conglomerate diversification
4. Joint ventures
Basis: Space Matrix
Philippine Airline is located in the Quadrant 1 due to the following reason:
With the standard of living of Filipino is improving gradually, airline industry stably increase, that is why given the rapid market growth of the airline industry.
Philippine Airlines is in an excellent strategic position, for Philippine Airlines, concentration on current (product development) is an appropriate strategy in terms of the specific circumstances that face the company.
The strategies both identified in SPACE and Grand Strategy Matrices are defined as follows:
1. Market Development, which is introducing present product and services into new geographical areas;
2. Market Penetration, which is seeking higher market share through greater marketing efforts;
3. Product Development, which is seeking increased sales by improving present products or developing new ones; Forward Integration, which is gaining ownership over distributors and retailers.
F. Table of Outcomes of Strategies in the Matching Stage
G. Quantitative Strategy Planning Matrix (QSPM)
INTERNAL
EXTERNAL
Strengths(S)
1. Employee morale is excellent
2. Image is highly recognized
3. Modes of reservation
4. Customer service
5. Maintenance and convenience
6. User-friendly information system
7. Available electronic ticketing (E-ticketing) system for all flights
8. Attractive special discounts and promos being offered
9. Asia’s Oldest carrier and still operating under its original name
10. Flagship carrier of the Philippines.
Weaknesses(W)
1. Space and transportation for cargoes
2. Expensive fair
3. Space in arriving area
4. Delayed flights
5. Limited advertising
6. Not part of an international alliance
Opportunities(O)
1. admission of new airline company in different country
2. Promos during peak season
3. Increase in tourism industry
4.Increase in the number of overseas workers
S-O Strategies
· Launching new events to increase recognition of the PAL
· Developing modern facilities and technology
· Tie ups with the department of tourism
· Expansion of branches and flight coverage internationally and locally
· Taking advantage of economies of scale by increasing the size of its operations.
W-O Strategies
· Offering discounted price scheme before closing time
· Initiate marketing strategies emphasizing advertisement and promotion
· Proper flight scheduling and imposing strict regulation involving departure time
· Upgrade and improvement of facilities
Threats(T)
1. A wide variety of promos are offered by their competitors
2. New entrant in the market
3. Continuous increase of gasoline price
4. Terrorist
5. Labor cost
6. Ongoing global economic crisis
7. Increase in airline’s maintenance cost
8. Employee strike due to potential lay-off
9. Ban from EU
S-T Strategies
· Intensifying the marketing strategies, programs and promos.
· Improving the efficiency of our production processes
W-T Strategies
· Increase and develop new advertisements and offer products and services at affordable price.
· Substituting cheaper materials in order to cute manufacturing costs
SPACE (Strategic Position and Action Evaluation) Matrix
INTERNAL Strategic Position
EXTERNAL Strategic Position
Y axis
Financial Strength (FS)
Environmental Stability (ES)
( +1 worst, +6 best)
( -6 worst, -1 best)
Return on Investment
+ 4
Technological changes
-2
Leverage
+ 5
Rate of Inflation
-2
Liquidity
+ 6
Demand elasticity
-3
Cash Flow
+ 3
Taxation
-4
AVERAGE
+ 4.5
AVERAGE
-2.75
Total Y axis score: + 1.75
X axis
Competitive Advantage (CA)
Industry Strength (IS)
( -6 worst, -1 best)
( +1 worst, +6 best)
Market share
-1
Growth potential
+ 3
Product quality
-3
Barriers to entry
+ 6
Product life cycle
-3
Access to Financing
+ 5
Brand and Image
-1
Consolidation
+ 5
AVERAGE
-2
AVERAGE
+ 4.75
Total X axis score: + 2.75
RELATIVE MARKET SHARE
HIGH
LOW
MARKET GROWTH RATE
(Cash Usage)
asda
HIGH
Star
International flight
On Flight Service
- Cabin amenities
- Meal and beverages
- Comfort and safety
Question Mark
PAL Free Transfer Service
Domestic Flight
LOW
Cash Cow
Cargo Services
- Express service
- Cargo classification
- Special cargo
- Valuable cargo
- General Cargo
Dog
4.0
STRONG
3.0-4.0
3.0
AVERAGE
2.0-2.99
2.0
WEAK
1.0-1.99
1.0
HIGH
3.0-4.0
3.0
I
II
III
MEDIUM
2.0-2.99
2.0
IV
V
VI
SLOW
1.0-1.99
1.0
VI
VIII
IX
Competitive Advantage (CA)
Industry Strength (IS)
( -6 worst, -1 best)
( +1 worst, +6 best)
Market share
-1
Growth potential
+ 3
Product quality
-3
Barriers to entry
+ 6
Product life cycle
-3
Access to Financing
+ 5
Brand and Image
-1
Consolidation
+ 5
AVERAGE
-2
AVERAGE
+ 4.75
MATRIX
Strategy
SWOT
SPACE
BCG
IE
GSM
Total
Integration Strategy
1.Forward Integration
☻
☻
2
2. Backward Integration
☻
☻
2
3. Horizontal Integration
☻
☻
2
Intensive Strategy
1. Market Development
☻
☻
☻
3
2. Market Penetration
☻
☻
☻
☻
4
3. Product Development
☻
☻
☻
☻
☻
5
Diversification Strategy
1. Related Diversification
0
2. Unrelated Diversification
0
Defensive Strategy
1. Retrenchment
0
2. Divestiture
☻
1
3. Liquidation
0
KEY FACTORS
WT.
Market Development
Market Penetration
Product Development
Strengths
AS
TAS
AS
TAS
AS
TAS
1. Employee morale is excellent
0.09
—
—
2
0.18
4
0.36
2.Image is highly recognized
0.05
3
0.15
4
0.20
3
0.15
3.Modes of reservation
0.07
1
0.07
3
0.21
3
0.21
4. Customer service
0.10
4
0.40
4
0.40
4
0.40
5. Maintenance and convenience
0.13
1
0.13
2
0.26
3
0.39
6. User-friendly information system
0.02
1
0.02
1
0.02
2
0.04
7. Available electronic ticketing (E-ticketing) system for all flights
0.11
1
0.11
3
0.33
4
0.44
8. Attractive special discounts and promos being offered
0.10
2
0.20
3
0.30
3
0.30
9. Asia’s oldest carrier and still operating under its original name
0.08
4
0.32
2
0.16
1
0.08
11. Flagship carrier of the Philippines
0.03
4
0.12
3
0.09
—
—
Weaknesses
1.Space and transportation for cargoes
0.03
—
—
—
—
4
0.12
2. Expensive fair
0.07
—
—
2
0.14
4
0.28
3. Space in arriving area
0.03
—
—
—
—
4
0.12
4. Delayed flights
0.04
—
—
—
—
4
0.16
5.Limited advertising
0.03
2
0.06
4
0.12
1
0.03
6. Not part of an international Alliance
0.02
—
—
—
—
2
0.04
1.00
Opportunities
1. Facilities are better equipped compared to other airlines
0.09
3
0.27
3
0.27
3
0.27
2. Promos during peak season
0.07
1
0.07
4
0.28
4
0.28
3. Increase of Tourism Industry
0.10
2
0.20
4
0.40
4
0.40
4. Increase in the numbers of overseas workers
0.12
2
0.24
3
0.36
3
0.36
Threats
1. Wide variety of promos are offered by other airlines company
0.06
—
—
4
0.24
—
0.42
2. New entrant in the market
0.04
1
0.04
3
0.12
4
0.16
3. Continuous increase of gasoline price
0.08
——
—
—
—
3
0.24
4. Terrorism
0.09
—
—
—
—
2
0.18
5. Labor cost
0.08
—
—
1
0.08
2
0.16
6. Ongoing global economic crisis
0.10
1
0.10
1
0.10
1
0.10
7. Increase in airlines’ maintenance cost
0.09
—
—
-
—
3
0.27
8. Rise of Labor union due to potential Lay-off
0.02
—
—
-
—
1
0.02
9. Ban from EU might ruin its reputation
0.06
—
—
2
0.12
2
0.12
Sum Total Attractiveness Score
2.50
4.38
6.10
