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Project Report on PIA-SM
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Transcript of Project Report on PIA-SM
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Topic: Project Report on
PIA (Pakistan International Airline)Subject ________ Strategic Management
Class ________________ M.com 4th (x)
Submitted to
Muhammad ARSLAN Sarwar
Submitted by
Names: Roll no.
Mohammad USMAN 095
Malia Azam 113
Saira Arif 131
Chaman Iqbal 051
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Acknowledgement
Thanks to ALLAH almighty for giving us the skill as well as we also wants to tribute to our HOLY
PROPHET Peace Be upon Him who show us the reality of God.
We would like to thank to our professorMuhammad ARSLAN SARWAR
(Strategic
Management) who have been providing guidance and support during the whole process of our
report. We feel motivated and encouraged every time we attend his lectures. Without his
encouragement and guidance this report would not have materialized.
The guidance and support received from all the group members who contributed to this report,
was vital for the success of the report. We were grateful for their constant support and help.
This report was arguably one of the most thrilling experiences in 4st
semester. Making this
report has immensely helped us in understanding the skills of Strategic management. Thanks!
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DEDICATEDTo
OurBeloved parentsMuhammad ARSLAN Sarwar
All UOGs faculty
All sweet friends, fellows and group members
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Table of Contents
1 Title2 Acknowledgement
3 Dedication
4 Introduction
5 Brief history
6Vision and mission statements
7 Internal and external assessment
8 SWOT analysis
9 Situational analysis
10 Strategies implementation
11 Matching Matrices12 Quantitative strategic planning matrix
13 Recommendations
14 Conclusion
15 References
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INTRODUCTION
Pakistan International Airlines is the national flag carrier, and as a symbol of National pride. PIA
head office is located in Karachi Airport. Principal activity of the PIAC is to provide air transport
services (passengers and freights). In addition, the corporation is engaged in providing
engineering, training, and other allied services. PIA play vital role in the growth of GDP as well
as earn sufficient foreign exchange for the country. It became member of IATA (International
Air Transport Associations) and commercial operation as a scheduled carrier for passenger and
cargo transportation.
Pakistan International Airlines Corporation (the Corporation) was incorporated on April 18,1956
under the Pakistan International Airlines Corporation Act, 1956(PIAC Act, 1956) and its shares
are quoted in all the stock exchanges of Pakistan.57 % shares held by Government of Pakistan,
and rest of 43 % shares held by Financial Institutions, Investment Companies, Individuals, Joint
Stock Companies, Foreign Companies etc. As the government is the principal owner of the
airline so the government selects the Board of Directors and the Chairman/CEO.
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Brief History
In the days when Pakistan was still in the revolting position (June 1946) Mr. Mohammad Ali
Jinnah, the Founder of the upcoming Nation, instructed Mr. M.A. Ispahani, a foremost
industrialist, to set up a national airline, on precedence basis. With his stupendous vision and
forethought, Mr. Jinnah had anticipated that with the formation of the two wings of Pakistan,
alienated by 1100 miles, a swift and well-organized mode of transport was imperative.
The novel airline was primarily a pilot project, registered in Calcutta as Orient Airways Ltd, on
23
rd
October, 1946. With A.M. Ispahani as the Chairman and Air vice Marshal O.K. Carter as theGeneral Manager of the new air hauler, operating license for the airline was obtained in 1947
with Calcutta as the base.
Orient Airways was a privately owned company, with limited capital and resources. It could not
be expected to grow and expand on its own. It was then that the Government of Pakistan decided
to form a state-owned airline and invited Orient Airways to merge with it. The outcome of the
merger was the birth of a new airline, named Pakistan International Airlines (PIA) on 11th
March, 1955.
Pakistan International Airlines established in 1954. PIA's first Super-Constellation (AP-AFQ)
registered on Apri'24, 1954. PIA started its regular service from May 10, 1954. Pakistan
International Airlines Corporation formed with merger of PIA and Orient Airways. PIA entered
the world of international aviation with a service from Karachi to London via Cairo and Rome.
Boeing 707-320 "International" introduced on the London route. First three of five Fokker F-27s
received and order placed for three Boeing 720B jet aircraft. PIA is the first Asian airline to
operate a pure jet aircraft.
At present, PIA operates to 75 destinations (38 international and 37 domestic) in countries spread
over 4 continents of the globe. One could say that since its inception in 1955, PIA has indeed,
come a long way.
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Vision and mission statements
Vision
PIAC has a vision to be a world class airline, meeting customer expectations through excellent
services, on-time performance, innovative products and absolute safety
Mission Statement analysis
PIACs mission statement is as follows
Employee teams will contribute towards making PIA a global airline of choice through
Offering quality customer services and innovative products Using state-of-the-art technologies
Ensuring cost effective measures in procurement and operations Developing safety culture
This mission statement addresses following core points of nine point mission statement analysis
Product and or service Technology Philosophy Self-concept Concern for people Concern for survival growth and profitability
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SWOT ANALYSIS OF PIA
Through the technique of "SWOT" one can analyze the present performance
conditions of any organization and its weaknesses. Also the opportunities it can grab
in the external environment and the threats it faces. This technique serves as a basefor sound recommendations and conclusions
Strength
Strengths are found in the internal environment of the organization. They are the
backbone of an organization. Strengths of an organization can over come any kind of
weaknesses that the organization is facing. PIA has a number of strengths due to
which it is still one of the leading airlines in Pakistan. These are as following
PIA has status of being Flag Carrier of Pakistan.
Highest Market Share at domestic network. Multilingual Staff on Board Booking Offices in all major cities both at domestic and International PIA has well established brand as its oldest airline in Pakistan. Subsidized fares Halal meat available at all flights. Electronic ticketing by web and through SMS. Highly Professional Staff Having Governments protection
Weaknesses
Weaknesses are also found in the internal environment of the organization.
Weaknesses if more in quantity can break down an organization easily. They can
over come the strengths as well. PIA also faces a number of weaknesses which are as
following
Old aging fleet of PIA causing higher operating cost. Huge burden of Employees which cause financial burden. Inadequate space on the aircraft Charging of higher fare as compared to competitors. Lack of marketing activities as compared to competitors.
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Poor quality of food/service on board specially in domestic flightsOpportunities
Opportunities exist in the external environment. They need to be recognized and
used according to the business being run. An opportunity recognized and utilized atthe right time will be the strength of tomorrow. Such kind of opportunities also
exists for PIA in its external environment. Some of them are as following:
PIA has huge potential market in Middle East if PIA upgrades its fleet. PIA has largest domestic network and by proper route planning PIA can generate
huge amount of Revenue with higher profit.
PTDC provides favorable market for domestic as well as international sectors forthe airline
PIA can generate more revenue by attracting customers through Web andMobile Reservations system.
Threats
Every organization faces external threats which could do damage to the business's
performance. These threats can damage the business and even could be the reason
of bankruptcy No doubt PIAC is well established and seasoned organization. Yet
there are certain threats being posed by the external environment.
Some of them are as under:
Negative rising perception about the country, regarding terrorism. Political instability and law and order situation. Rising fuel prices in the world. Over staffing at all levels Frequently rising Airlines fare Fast growing domestic and international competitors Effective promotion strategies adopted by other competitors like Emirates and
Shaheen and Air blue.
From the above SWOT analysis I came with certain conclusion about PIA. No doubt PIA has
good market for further growth and it has many advantages over many others airlines. But
PIA should upgrade its old aging fleet as it is causing the PIA major financial loss because
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fuel prices has risen in the international market and PIA has still old fleet, which causes
higher operating cost.
PESTLE ANALYSIS
This tool looks at macro environment of a firm. The macro environment affects the firms at
major level therefore it is necessary to analyze the affect of political, economic, social,
technological, legal and environmental factors on the firm.
PoliticalThe politics of South Asia and Middle East in general and politics of Pakistan in particular are
very important for PIA as its major destinations are located in these regions.
The political situation in Pakistan is not normal. In the history of Pakistan hardly one or two
governments have completed their tenures. Political instability in the country is result of
interference by non political forces. The frequently changing political environment suffer firms
operations especially the government own organizations. The new governments change the top
level management soon after taking the charge of the government and appoint people with
political background on top level of organizations without testing the required educational
qualification and relevant experience. PIA is the most politically affected organization as every
new government appointed their own people who turned a profitable organization into a loss
bearing one which stopped its growth and started journey towards decline.
EconomicThe economic condition of Pakistan is in a critical position. Economic growth is very low as
compare to other countries. The inflation rate is very high. Foreign investment is also
unsatisfactory. As PIA is operating from Pakistan, its international operations are affected by
exchange rates. Oil prices are an issue for all airlines. A huge amount is being paid as fuel cost.
Increase in oil prices affected the income of PIA as well. Fuel is the main component of airlineoperations. The oil prices are increasing at a higher rate affecting the PIAs profitability. These
all economic drawbacks seriously affect the performance of PIA.
SocialPakistan is ranked among lower-middle income countries. The Pakistani model for economic
growth since independence was described above as restricted growth. Social development has
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lagged behind economic growth, resulting in unequal social development and notable
deficiencies in education, health services, sanitation, and gender equality (Khan, Omar 2004).
The society of Pakistan is moderate in accepting changes. The social changes in Pakistan are
gradually taking place. Due to globalization and advancement in information technology, the
people accept social changes occurring throughout the globe. There are two standards in our
society, one is the upper class society and the other is lower level society which is in majority.
TechnologicalThe internet has enabled PIA to keep costs low by allowing customers to book through its
website rather than through an agent. However, the web is less attractive for PIA expansion in
east domestic, as access to information technology is limited to certain areas and facility
providing activities lower the other developing countries in the region. This situation is likely to
change in the longer term.
PIA wholly depends on other agencies for exchange of their older crafts to new ones. It also
requires a huge financing system which is very difficult to it because of the economic condition
of the country as well as its own financial position. PIA is unable to buy new technology as it
costs too much. For this purpose the organization approaches to financial institution that provide
funds on their own conditions which reduces the profitability as the organization spends a huge
amount on paying interest.
LegalThe involvement of government in PIA is backed by legislation. The government uses these
powers delegated by legislation in their own interest which affects the performance of the airline.
Another drawback is its centralized system which is a time consuming practice and the important
actions cannot be taken immediately. Delays due to this centralized system create problems for
smooth operation of the airline and it causes huge losses and the organization also loses available
opportunities due to long decision making process.
Environmental
The main environmental issue facing PIA is that of policies formulated by legislation about
greenhouse emissions. The airline industry affects the environment negatively by increasing air
pollution and noise pollution. PIA uses regional airports to reduce the environmental effects on
busy airports situated in main cities of the country. Furthermore PIA has also introduced waste
disposal plan which helps in reducing pollution in the country.
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PROPOSED STRATEGY
SPACE Matrix
Internal Strategic Position External Strategic Position
Y Axis
FS+ES= -1.14
Financial Strength (FS)
ROI =+1 ROE=+1 Profitability Ratios=+2 Activity ratios=+3 Leverage Ratios=+1 Liquidity Ratio=+2 Average= +1.66
Environmental Stability (ES)
Barriers to entry=-1 Inflation=-5 Technology change=-3 Competitive pressure=-4 Demand variability=-1 Average= -2.8
X Axis
CA+IS= -0.62
Competitive Advantage (CA)
Market Share=2 Customer Loyalty=-1 Direct Flight (point to
point)=-1
Huge and Young Fleet=-2 Service Quality =-3 Management Experience
(Professionalism)=-5
Average = -2.33
Industry Strength (IS)
Growth Potential= +3 Market Entry= +1 Technology Knowhow=
+2
Financial Stability= +2 Fuel Price Stability= +1 Human resource
availability=+2
Government Support=+1 Average= 1.71
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The graph indicates the PIAC to be in Third Quadrant which is defensive strategy quadrant
Defensive Strategies
In the defensive quadrant the company may use one of the following strategies rectifying internal
weaknesses and avoiding external threats. Defensive strategies include retrenchment, divestiture,
liquidation, and concentric diversification.
Conservative
DefensiveCompetitive
Aggressive
+1 +2 +3 +4 +5 +6-1-2-3-4-5-6
+1
+2
+3
+4
+5
+6
-1
-2
-3
-4
-5
-6
(-0.62,-1.14)
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BCG Matrix (Boston Consulting group Matrix)
PIAC is the only SBU PIAC has it has an international share of 38.04% (projection based on last years
increase or decrease in share) making it a benchmark in its industry in relation to Pakistan. Domestically
the market share is 74.61(projection based on last years increase or decrease in share) making it a cash
cow.
Domestic
SBU Revenue Revenue% Profit Profit% Relative MS Growth rate
PIAC 94,563,765 100 (5,822,431) 100% 100% -0.01
PIA
M
a
r
k
e
t
G
r
o
w
t
h
Relative Market Share
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Foreign
SBU Revenue Revenue% Profit Profit% Relative MS Growth rate
PIAC 94,563,765 100 (5,822,431) 100% 100% -0.05
Analysis Description
The company lies in both cases in cash cow but according to Strategic management: concepts and
cases, / tenth edition By Fred R. David if the companys growth rate is too slow and productivity is
declining then the best way to solve the problem may be in retrenchment or divestiture. In some cases
when the portfolio is strong then we can opt for diversification.
PIA
M
ar
k
et
G
r
o
w
t
h
Relative Market Share
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Internal External Matrix (IE Matrix)
The IE matrix of PIAC is as follows
Analysis Description
The above diagram indicates that PIAC lies in the middle order of HOLD and MAINTAIN.
Inthis type of situation the company may either use market penetration or product
development. In the case of PIAC we see the market penetration is not of much use hence
product development in the form a visible and distinctive brand identity may be taken in mind.
Here product may very well be in the form of PIAC as a pure Pakistani Brand Airline.
Grand Strategy Matrix
Small Share No
Money
Strong Share or
Strong Money
Strong Share and
Strong Money
Sector Growth High
Sector Growth Low PIA
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Analysis Description
PIACs Domestic and International share is highest in the market but the growth in this sector in couple
of last years is negative. One main important point to ponder is PIAC has financial problems these days
because of debt. In this type of situation as the diagram above indicates you have the opportunity of
strategies likes the following
Cost Reduction Add related products and services for existing customers Add new products and services for new customer base Underserved Niche (very small) Market domination Strategic partnership Joint ventures
Common Strategies
The most common strategies from above analysis have been
Cost reduction through retrenchment or divestiture Product development through concentric diversification
o For this purpose joint venture may be usedWe will further analyze them in the stage 3 of proposed strategy formulation
Proposed Strategy Formulation
Quantitative Strategy Planning Matrix (QSPM)
Analysis Description
The QSPM clearly tells that cost reduction is the most important and first thing to do in this type of
environment cost reduction may be done in one or more than one following areas, which ever suites
best
raw material procurement logistics - inbound and outbound production ( process ,time and work study, maintenance ,automation) energy human resource ( out sourcing ) sales & marketing finance
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Raw material procurement is almost impossible in current financial condition of PIAC; no doubt PIAC is
already working on production in its case deliverance of service, Human Resource Management Is the
focus point of all the problem as far as the analysis (SWOT) goes. Sales and marketing have already been
started to develop to automation and e ticketing compromising
Proposed Strategy
We propose the retrenchment strategy or turnaround strategy by the help ofrightsizing.
Our main goal is to go through a temporary belt-tightening, which will allow the firm to pursue a growth
strategy at some future point
Structure to Strategy matchThis topic may be considered most important in this analysis and report. The structure of organization is
very important in creating resonance between people and profits. Higher benefits in form of hugeprofits and above average returns are only for organizations which have structures according to their
strategies
Main problem of PIAC is the fact that it is not adaptable in nature when it comes to change. This is to
exclude image on logo or fleet. This is greater than this this is to consider that every strategy comes with
its own proposed structure
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Recommendations There is a need to adopt a transparent method for privatization of these enterprises through
proper mechanism and plan which would boost the economy.
It will also help the government get rid of the circular debt piling up against theseinstitutions.
There is also a need to encourage both local and foreign investments in Pakistan andgive confidence to private sector to contribute its share for economic recovery of the country.
Without giving confidence to the private sector economic revival is impossible as the privatesector is engine of growth and can create employment and competition.
Conclusion
From the discussion above, it is clear that PIA is then only national airline of Pakistan. It has
developed a strategy different from those of its competitors, and that these differences directly
and indirectly contribute to its competitive advantage. PIA has reasonable opportunities along
with threats. But the frequent involvement of every government in top management of PIA
resulted in discontinuation of its strategic policies. An organization earning average profits five
years ago is now bearing huge loses.
There is a need to adopt a transparent method for privatization of these enterprises throughproper mechanism and plan which would boost the economy.
It will also help the government get rid of the circular debt piling up against theseinstitutions.
Without giving confidence to the private sector economic revival is impossible as the privatesector is engine of growth and can create employment and competition
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References1. www.piac.com2. http://tribune.com.pk/story/269007/finance-ministry-tells-pia-to-adopt-austerity-measures/3. http://www.bdoebrahim.com.pk/index.php?option=com_content&task=view&id=525&Itemid=04. www.Businessrecorder.com5. http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-
overcome-losses/
6. http://www.slideshare.net/biztekians123/strategicanalysisofpia
http://www.piac.com/http://tribune.com.pk/story/269007/finance-ministry-tells-pia-to-adopt-austerity-measures/http://tribune.com.pk/story/269007/finance-ministry-tells-pia-to-adopt-austerity-measures/http://www.bdoebrahim.com.pk/index.php?option=com_content&task=view&id=525&Itemid=0http://www.bdoebrahim.com.pk/index.php?option=com_content&task=view&id=525&Itemid=0http://www.businessrecorder.com/http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.slideshare.net/biztekians123/strategicanalysisofpiahttp://www.slideshare.net/biztekians123/strategicanalysisofpiahttp://www.slideshare.net/biztekians123/strategicanalysisofpiahttp://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.businessrecorder.com/http://www.bdoebrahim.com.pk/index.php?option=com_content&task=view&id=525&Itemid=0http://tribune.com.pk/story/269007/finance-ministry-tells-pia-to-adopt-austerity-measures/http://www.piac.com/