Air India 5

2012 Flying Too depressed circulate India 2009 & beyond External Environment outline Group 10 Strategy abstract begins with an compend of the forces that shape the competition in the manufacture in which a company is based. An important factor of the analysis is External surround analysis. The indwelling purpose of this analysis is to identify the opportunities and threats in the organization operating environment that go away affect how it pursues its mission.Analysis the industry environment requires an assessment of the competitory structure of the companys industry. It as well requires analysis of the nature, stage, dynamics and invoice of the industry. Here, while analyzing the remote environment of disperse India according to the information presented in the case, we will concentrate on Porter Five Forces Model, PEST Analysis of the Air India, opportunity and threats to Air India. Finally, we will quantify all our analysis factors to come to a conclusion. Porters 5 forces modelPorters cardinal forces analysis is a framework for industry analysis and affair system development formed by Michael E. Porter of Harvard Business School in 1979. It draws upon industrial organization (IO) economics to derive five forces that determine the militant intensity and therefore attractiveness of a food market. Attractiveness in this background continues to the overall industry net profitability. An unattractive industry is one in which the combine of these five forces acts to drive down overall profitability.Three of Porters five forces refer to competition from foreign sources. The remainders are internal threats. Porter referred to these forces as the small environment, to contrast it with the more general term macro environment. They consist of those forces rigorous to a company that affect its ability to serve its customers and make a profit. A clear example of this is the airway industry. As an industry, profitability is pitiful and yet in dividual companies, by applying unique business models, have been up to(p) to make a return in excess of the industry average.We will see how these five factors are working for Air India. I. Rivalry among subsisting competitors 1. Competition in domestic and planetary routes * On domestic front, esoteric airlines like Jet Airways, Kingfisher Airlines * On international front, major competition was from companies like Singapore Airlines, Etihad Airlines, Qatar Airlines and new entrants like JA 2. Better performance by competitors 3. speedy increase in market share of competitors 4. Poaching of employees by competitors II. scourge of new entrants 1. Possibility of liberalization of atmosphere Industry will erupt the entry barriers and thereby will lead to increase in twist of new entrants 2. Business was very lucrative to attract new entrants 3. arranged and rapid growth of demand for airlines offer scope for profitable business and low be carriers 4. Examples GoAIR, Indigo Air, Paramount Airways, SpiceJet III. Threat from substitution Road and racecourse services posing a major threat by offering cheaper, reliable, convenient services. Travel.In case of higher Air ticket fares, Air India could lose potential customers to Rival airlines and Indian Railways. The guess of loss of market share to Indian railways further increases by the fact that over a finish of time the rail ticket fares have marginally varied compared to significant variation in air ticket fares. IV. Bargaining cater of suppliers 1. Slow nature of aircraft sales, because the high value order placed by the industry can take several years to be delivered. 2. drudge unions are suppliers who have significant power.The performance and flexibility of the entire industry depends heavily on labour unions. 3. Aviation fuel is a trade good and its prices are decided by market forces and existing geopolitical factors such(prenominal) as OPEC. At times, oil producing nations at the behest o f OPEC manipulate oil end product target in order to keep the prices of crude to suit their profit intentions. High cost of fuel accounts for just about 35% of the total cost and increasing cost is a threat to the companys profits. 4. Aviation Turbine Fuel (ATF) is a major cost component for the Airlines in India.It is about 40% of the operating cost of the domestic carriers V. Bargaining power of buyers The dicker power of buyers refers to the amount of pressure customers can place on a business, thus, affecting its prices, volume and profit potential. Various airlines are competing for the same customer, which also results in strengthening the buyer power. Hence, the bargaining power of customers in the airline industry is very high since they are price sensitive and lookup for the best deals available. Customers are price sensitive.Many new players who are Low Cost Carriers attract these travelers by offering them low fares and those that are comfort station oriented by provi ding them with frequent flights. While choosing which airline to fly with, customers enchant switching costs through frequent flyer programs created by about airlines. PEST Analysis PEST analysis stands for political, Economic, Social, and Technological analysis and describes a framework of macro-environmental factors used in the environmental scanning component of strategical management. Some analysts added Legal and Environmental and rearranged the mnemonic to PESTLE.It is a part of the impertinent analysis when conducting a strategic analysis and gives an overview of the different macro environmental factors that the company has to take into consideration. It is a useful strategic tool for taking into custody market growth or decline, business position, potential and direction for operations. * Political factors are how and to what degree a politics intervenes in the industry or firm. Specifically, political factors include areas such as tax policy, labour law, environmenta l law, trade restrictions, tariffs, government policies and political stability. Economic factors include economic growth, saki rates, exchange rates and the inflation rate. These factors have major impacts on how businesses charter and make decisions. * Social factors include the cultural aspects and include health consciousness, macrocosm growth rate, age distribution, career attitudes and emphasis on safety. Trends in amicable factors affect the demand for a companys products and how that company operates. * Technological factors include technical aspects such as RD activity, automation, technology incentives and the rate of technical change.They can determine barriers to entry, minimum efficient production level and fascinate outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation. In case of Air India, the analysis of impertinent environment is as follows Having done the required analysis, outright let us quantify the op portunity and threats. 1 Poor control over decision making T 2 Drop in oil prices* O 3 heavy control and interference of government O 4 worsening service image T 5 Labour union T 6 inclination of society towards low cost travel T global recession T 8 significant air traffic growth over a period of time O 9 restriction on FDI in Indian aviation industry O 10 Mergers among competitors T 11 possibility of opening of aviation market and privatization T 12 interest marrow of new aircraft orders T 13 companys image perceived as creation carrier T 14 near monopoly among Indian players in international routes O 15 over capacity of industry T 16 poaching of pilots from competitors T 17 declining debt equity ratio T 18 changes in ground handling policy T 19 manner problem THere T indicates Threat and O indicates probability Assigning the weightage to the important factors, in the sense of their importance in analyzing external environment and using rating scale of 1 to 5 where 3 indicat es average favorableness of the external environment, we get- As the quantified average of all the external environment factors is coming slightly below average, we conclude that, the current external environment is not favorable to Air India but, it can work on its decision making process and improvement of service image as an immediate measure.