American International University-Bangladesh
(AIUB)
TERM PAPER ON
“MALAYSIA AIRLINES”
Submitted To
Prof. Dr. M. Mahmodul Hasan
Faculty of Business Administration
Submitted By
GROUP: JILAPIR PECH
Strategic Management
Submission Date
08th
August, 2014
COST REVENUE
= 1X
COST = 0.9881X + 13,504 Million
BREAK EVEN SALES VOLUME 1,134,790
NUMBER OF FLIGHTS
DEFINATION
OF STRATEGY
Strategy is often the difference between:
§ Success
and failure, between mediocrity and excellence
§ A
great manager and average managers
§ Stumbling
through life and moving ahead with purpose
STRATEGIC
MANAGEMENT (THEORY: 2000 – 2010)
Strategic Management can be defined as (1) the
art and science of formulating, (2) implementing, and (3) evaluating
cross-functional decisions that enable an organization to achieve its
objectives.
Strategic Management focuses on integrating
management, marketing, finance/accounting, production/operation, research and
development (R&D) and computer information systems to achieve
organizational success.
STRATEGIC
MANAGEMENT (THEORY: 2011 – 2015 ±)
Strategic management involves strategy
development, which is comprised of five stages:
·
Discovery: Malaysia airlines is founded at may 1st
1946 and commencement at October 1972.
·
Strategic
thinking: they are also trying application of business insights on a continual
basis to achieve competitive advantage’ as one of the best air craft in the
world
·
Strategic
planning: in this stage they have formed their mission & vision statement MISSION To provide air travel and transport service
that rank among the best in terms of safety, comfort and punctuality. VISION An airline uniquely renowned
for its personal touch, warmth and efficiency.
Strategy roll-out: Malaysia airlines slogan is
"Journeys Are Made by the People You Travel With" so they try to
provide quality service for those customer through their strategic planning &activities
and achieve their goals.
Strategy tune-up/adjustment: they yearly analyze
their performance and look into strategy if they need to do any adjustment they
do it according to their desired way.
According
to the definition of strategic management our project “Malaysia airlines” fit into (theory
2011-2015) as they also do strategic planning, and thinking and strategic
adjustment at the end.
MOST
STRATEGIC MANAGEMENT MODEL
STRATEGIC MANAGEMENT MODELS
1. Five
Forces Model
2. PESTEL
Analysis
3. SWOT
Analysis
4. Blue
Ocean Strategies
5. Strategy
Group Map
6. Seven
S Models
PORTER'S FIVE FORCES ANALYSIS ON MALAYSIA
AIRLINES
PESTEL
ANALYSIS OF MALAYSIA AIRLINES
|
POLITICAL
|
ECONOMIC
|
|
§ Taxation
- an obstacle during recession. Malaysia Airlines reported a Net Loss of Tax
of RM433 million in 2012 compared to a Net Loss of RM2.52 billion registered
for the 12 months ended 31 December 2011.
§ Increasing
operational cost due to newly imposed wage policy by government. Increasing
life standard result greater requirement of wage which results added burden
on operational cost.
|
§ The
rapid growth of fuel cost. Recent development shows that, fuel prices to rise
by up to 5 pound due to Ukraine crisis
§ The
exchange rate is fluctuating which results deviation on revenue earnings.
§ Differentiated
need - Luxury VS Necessity. The business travellers consider travelling as a
requirement whereas travellers consider airline travelling as a luxury need.
|
|
SCOCIAL/CULTURAL
|
TECHNOLOGICAL
|
|
§ Psychological
issue - flight phobia.
§ Greater
concern on safety for incidents like - nine-eleven and disappearance of
flight MH 370 and the recent incident of plane crash.
§ A
research shows that there is around 7% rise among the youth in considering
travelling as favourite holiday activity.
|
§ Increasing
practice of online purchase
§ Application
of debit & credit on air ticket purchase
§ Integrated
Communication System, Interactive Voice Response System & Knowledge
Portal for reducing operational cost
|
|
ENVIRONMENTAL/ECOLOGICAL
|
LEGAL
|
|
§ Reduction
of CO2 emission
§ Growing
practice of CSR activities
§ Flight
failure or delay caused by natural hazards.
|
§ Expensive
landing charges at gateway airports like - Bangkok, Beijing, Hong Kong and
Singapore.
§ Tightly
regulated aviation market by bilateral air rights agreements.
|
SWOT ANALYSIS OF MALAYSIA AIRLINES
|
STRENGTHS
|
WEAKNESSES
|
|
§ Malaysia Airline owned by
government, It also assure prospective government support
§ The company operates in
diversified market segment which allows minimizing the portfolio risk
§ In Malaysia in its home
region, the company is standing in the second best market position , It
covers over 50 international and 35 domestic destinations with a fleet size
of over 100
§ In the route like –
Malaysia, Thailand - Malaysia Airline is found to be the most accepted brand
for customers.
§ The company has a strong
organisational structure
§ Cargo and passengers revenue
has also been increased by 34% and 15% respectively which is again very big
strength for the company
|
§ Relying Heavily on
International Onward Moving Traffic
§ Expensive Administrative
with their 2000 employee and other extra cost.
§ Price insensitivity to
demand
§ Financial ratios like net
profit margin has seen a decline from 24 to 18 and then 16 last year which is
getting to bring more severe results for the firm if not controlled.
§ Malaysia Airlines exercised
a financial restructuring which resulted badly and thus company bared huge
costs of that which was the biggest weakness it ever had.
|
|
OPPORTUNITIES
|
THREATS
|
|
§ Greater customer interest
for travelling
§ Reaching the low end segment
with low pricing strategy in global market.
§ Concentrating on the
off-peak seasons.
§ Malaysia Airlines could
target the huge market and untapped demo of missing persons, and also get
bonus wordplay points, with the addition of “International” to its company
name.
§ Medical Tourism, the travel arm of Malaysia Airlines is expanding its health screening
packages currently offered to customers through an existing collaboration
with HSC Medical Center, a diagnostic center in Ampang, Malaysia.
|
§ Share Price decrease 11% and
market price of the company 40% in July 2014Natural Calamity affect a big
think for this industry example Malaysia Airlines Flight MH370
§ Global Terrorism like
Malaysia Airlines plane MH17 'shot down' in Ukraine
§ Regulative variances on
countries Example like Angola, Eritrea, Gabon, and
Zambia.
§ Local & international
competitions like Thai Airways, Singapore Airlines and emerging low carriers
such as Air Asia and 6et Star.
|
BLUE OCEAN STRATEGY
The Blue Ocean Strategy
authors, Malaysia Airlines has implemented many strategic.
A. Eliminate
1.Over the counter booking system
2.Free food/beverage on the plane
3.Seating Class booking system
4.Malaysian low-cost airline
B. Reduce
1.‘Luxury’ facilities provided by airport lounge
2.Number of attendance service on the plane
3.Seat quality is very good.
C. Raise
1.Focus on several key destinations
2.Increase frequency of flight
D. Create
1.Online booking system
2.Point-to-point travel system
3.With these strategic moves, Malaysia Airlines
was able to focus on factors that really bring value to the customers such as
point-to-point travel system, easy booking system, etc. This helped Malaysia
Airlines to reduce cost and at the same time increase the value to the
customers – ‘Value Innovation’.
With the successful venturing into the Blue Ocean Strategy, has ventured into other businesses such as
Tune Hotel: ‘limited service’ hotel chain that provides a claimed ‘five-star
sleeping experience at a one-star price’ accommodation.
STRATEGIC GROUP MAP
EXTENT
OF SERVICE DIVERSITY
The offered services
of Malaysia Airline include – Airline Service, Aircraft Maintenance Service,
Repair and Overhaul (MRO) and Aircraft Handling.
EXTENT OF GEOGRAPHIC COVERAGE
Malaysia Airlines
operates flights in Southeast Asia, North Asia, South Asia, Middle-east and on
the Kangaroo Route between Europe and Australasia.
NUMBER OF MARKET SEGMENTS
SERVED
Malaysia Airline is found to be
focused on the following segments:
§ Business
Segment
§ Government
& International Organisations
§ Leisure
Travellers
§ Migrated
Personal & Leisure Travellers
§ European
Personal & Leisure Travellers
§ Seasonal
Holiday Travellers
DISTRIBUTION
CHANNELS USED
Malaysia Airlines has two airline subsidiaries: Firefly and MASwings.
Firefly operates scheduled flights from its two home bases Penang International
Airport and Subang International Airport. The airline focuses on tertiary
cities. MASwings focuses on inter-Borneo flights. Malaysia Airlines has a
freighter fleet operated by MASkargo, which manages freighter flights and
aircraft cargo-hold capacity for all Malaysia Airlines' passenger flights.
MASCharter is another subsidiary of Malaysia Airlines, operating charter
flights using Malaysia Airlines' aircraft.
McKINSEY – SEVEN S-MODEL
§ Business
Environment/Strategy: Malaysia Airline is a renowned
service provider especially for travelling across the East Asian zone. The
major competitor is this region includes – Emirates, Singapore Airlines, Qatar
Airlines, Biman Bangladesh Airlines and many more. However, each of the
competitors includes different routes and different price packages. Based on
the routes and differences in travelling point variances each of them has a
strong market share with varying customer base ranging from low end to high end
segment.
§ Shared
Values: The Company expects to take the leading
position in the market with providing safe, timely and comfortable travelling
experience.
§ Structure:
Malaysia airline goes by a flat & moderately decentralized organisational
structure where each division has their certain level of authority in decision
making.
§ Staff:
The Company employs over 20,000 workforce including both technical &
non-technical employees.
§ System/Infrastructure:
The Company maintains an interactive infrastructure that includes online
purchasing platform, fleet maintenance process and baggage keeping and other
relevant service maintenance structure.
§ Skills:
The key skill of the industry includes – passenger hospitality, fleet
maintenance, operational accuracy, time management and other relevant
efficiencies.
§ Style:
Targeting the mid to upper mid segment, Malaysia airline is found to be a great
service provider in terms of its competitors.
Malaysia Airlines’ journey to achieving
its current reputable position has been a remarkable one. A small airline
operator, it has grown by leaps and bounds to be the force it is within the
industry today.
Malaysia Airlines (MAS)
operates flights from its home base, Kuala Lumpur International Airport and
with a secondary hub in Kota Kinabalu and Kuching. The airline has its
headquarters on the grounds of Sultan Abdul Aziz Shah Airport in Subang,
Selangor of Greater Kuala Lumpur. It is a member of the One world airline
alliance.
MISSION
To provide air travel and
transport service that rank among the best in terms of safety, comfort and
punctuality.
VISION
An
airline uniquely renowned for its personal touch, warmth and efficiency.
COMPANY
ORGANOGRAM
FIG: ORGANOGRAM OF MALAYSIA AIRLINES
SWAN EVALUATION
STRENGTHS
§
Strong
government support.
§
Extensive
operations in other global destinations
§
Strong
market share
§
Premium
brand image
§
Well-designed
organizational structure
WEAKNESSES
§ Relying
Heavily on International Onward Moving Traffic
§ Expensive
Administrative Expense
§ Extensive
operational cost
§ Limited
growth prospect
ACHIEVEMENTS
Malaysia Airlines has been awarded 5-star
status in the SKYTRAX World Airline Award, joining an elite group of airlines
to receive this prestigious ranking for their truly consistent and high quality
of product and service.
ASIA'S LEADING AIRLINE
§
World
Travel Awards (WTA) 2013
SKYTRAX WORLD AIRLINE AWARDS 2013
§
The
World's 5-Star Airline Award
§
Best
Airline Signature Dish 2013
CELLARS IN THE SKY 2012 AWARDS
§
Best
First Class Cellar
§
Best
First Class Red Wine
§
2nd
in Best First Class Sparkling
SKYTRAX WORLD AIRLINE AWARDS 2012
§
The
World's 5-Star Airline Award
§
World's
Best Cabin Staff 2012
§
Best
Airline Signature Dish 2012
GOLD AWARD FOR TRANSPORTATION, TRAVEL & TOURISM CATEGORY
§
Putra
Brand Awards 2012
THE MOST PROMISING BRAND AWARD (FIREFLY)
·
Putra
Brand Awards 2012
WORLD'S LEADING AIRLINE TO ASIA
·
World
Travel Awards (WTA) 2011
NEXT STEP
Malaysian Air Reviews Future Plane Orders After
MH37
TOWS MATRIX EVALUATION ON MALAYSIA AIRLINES
Based on the cross matching of internal
strengths and weaknesses of Malaysia Airlines with the external opportunities
& threats of the company, we can formulate the following strategies:
|
Internal
|
Score
|
|
|
STRENGTHS
1.
The company operates in
diversified market segment
2.
Strong market share.
3.
Premium brand image.
|
WEAKNESSES
1.
Extensive operational cost
2.
Price insensitivity to demand
3.
Limited growth prospect
|
CPM:
2.95
|
|
External
|
Score
|
|
|
OPPORTUNITIES
1.
Greater customer interest for
travelling
2.
Reaching the low end segment
with low pricing strategy in global market.
3.
Concentrating on the off-peak
seasons.
4.
Untapped market
5.
Medical Tourism
|
THREATS
1.
Rising fuel cost
2.
Natural Calamity
3.
Global Terrorism
4.
Regulative variances on countries
5.
Local
& international competitions
|
EFE:
2.80
|
VALUE CHAIN ANALYSIS OF MALAYSIA AIRLINES
|
üArrival at airport
üBoarding passes
üLuggage
üSecurity
üShopping Food and entertainment
|
|
üMarketing and sales
üPricing
üTicketing
üBooking management
üAfter sale communications
|
|
üPreparing plane
üGate management
üLoading the plane
|
|
üAirport Selection
üTerminal development
üScheduling
|
|
üAirframes
üEngines
üMaintenance
|
|
üCatering
üSafety
üTV and media
üShopping
|
|
üUnloading
üDelivery to terminal
üLost luggage
|
|
üCleaning plane
üRe-fuelling
|
VISA - MODEL
VISION
An airline uniquely renowned for its personal
touch, warmth and efficiency.
STRATEGY
Malaysia
Airlines evaluated the feasibility of a premium service in conjunction with
another airline. Dr. Emre Serpen and the Inter VISTAS team developed network
design and revenue forecasting as part of a broader project team.
ACTION PLAN
Malaysia Airlines (MAS) has unveiled a new
business plan aiming to restore profitability by significantly cutting capacity
and increasing focus on the premium sector, which includes the launch of a new
regional premium carrier in 1H2012. Several business units including
maintenance, cargo and ground handling are to be spun-off, most likely in 2012.
GREAT - MODEL
GOALS
ä
The
short term goal is to minimize the cost at first for 6 month ( January to June)
ä
To
minimize cost - sell of idle or old aircrafts is needed to reduce maintenance
cost.
ä
Introduction
services in local routes even at break revenue to acquire market presence
ROLES
ä
Greater
effort and efficiency
ä
Greater
monitoring
ä
Aggressive
sales strategy
ä
Strong
corporate sales team
EXPECTATIONS
ä
Target
is to achieve economies of scale through optimum service encounter.
ä
To
achieve that we will be need to minimize the cost and earn the revenue at its
peak.
ä
The
this moment the break even target sales is 1134790 million flights which must
have to be reduced
ACCOUNTABILITIES / ABILITIES
ä
HR
team will be accountable for monitoring performance
ä
Sales
team will be accountable for target achievement
ä
Product
development team will have to be accountable for competitive product
development
ä
Operations
team will provide flawless service
ä
A
group audit will be developed to ensure best output
TIMING
ä
Sales
increase and cost decline will have to be performed simultaneously within first
6 months
ä
Besides,
unnecessary operational burdens will have to be eradicated with coming 2
months.
SMARTER – MODEL
Incidents like flight crash, disappearance
of flights have damaged the brand and caused greater loss in recent days and
developed a requirement of following SMARTER strategies:
SPECIFIC
Malaysian Airline has been suffering from image
crisis for several incidents and they had a decline of sales. The company must
have to reduce the operating cost
by 25% in increasing its
profitability in the longer run.
MEASURABLE
MAS should focus on
regional routes within four hours from Kuala Lumpur, including to destinations
in Southeast Asia, the Indian subcontinent and greater China. MAS can expect
this focus will result in immediate 19%
improvement in yields.
ACHIEVABLE
Based on BCG matrix
& Grand Matrix evaluation the efforts to sustain the existing market share
of 41% is not believed to be achievable for upcoming. Therefore, it has to make
sure that its sales are increased by 15%
(the industry growth) in upcoming three years. However, it must have to control
its operating expenses to sustain in the longer run meaning sustaining after
three years.
REALISTIC
Considering
the amount of financial resources and manpower expertise of Malaysia Airline
found to be unrealistic since it is suffering drastic loss for brand crisis. To
make the plan more realistic, they have to come up with realistic goal of cost
cutting by 25% in two years
TIME
It is
advisable to MAS to come up with acquisitions and mergers to enhance the usage
of the idle aircrafts in upcoming five
years from 2014 to 2019 of its operations.
ENCOMPASSING
The
mission of MAS is achieving the leading position with service and it is only
possible if the company manages to outdo their competitors by achieving
economies of scale and cost leadership in the market.
REVIEWED
The
efforts on reduction process of operating cost must have to be monitored in each day to achieve the profitability
of the company.
BCG MATRIX
Based on the previous analysis it is observed
that Malaysia Airline has a substantial market share along with a low growth
prospect in its corresponding industry. Based on the study it is found that
Malaysia stands in the cash cow position of Airline industry.
Cash Cow product is where the product gives a
big amount of cash for airlines and had sustained its good market share but the
market growth not growing rapidly as before. It reached it maturity stage and
market share become saturated slowly. At this stage, the route is a cash-mines
for airlines because the route turnover higher than it expenditure cost.
However the Cash Cow product can be a Dog product if it not being maintained.
To avoid the route from being a Dog product, airlines has to put a bit
investment to inject and boost up the market growth thus it will sustain its
market share and profits. Cash Cow product not only about the existing route
that airlines have, but also for a new route to be introduced. If the route is
the Cash Cow route, it is not a smart action to enter the market share of the
route since it already saturated. Even, if the airlines have high determination
to operate the cash cow route, it will require a large amount of investment
(perhaps larger amount than Question Mark) to enter the market, not yet talking
about the survival of the route.
PURE OBJECTIVES
POSITIVE
Through this journey of success and achievements,
Malaysia airlines have never compromised the service quality. This is one of
the key factors of success as a major contributor.
UNDERSTOOD
§ Performance:
efficient and skilled workers who knows about their own job
§ Perfectly.
§ Style:
Emphasize on quality, encourage teamwork.
§ Jargon: most
used are air traffic, carry on ,carrier
§ Culture: They
also value their great workers, partners, suppliers and customers.
RECORDED
They keep records for all of their activities so that
if needed they can use those as a base in future.
ETHICAL
Malaysian air lines conduct all its business in line with the strictest Code of
Ethics.
MARKET ANALYSIS OF MALAYSIA AIRLINES
MARKET SEGMENTS
Malaysia
Airline markets to segments of 18 – 34 year olds, businessmen and the segment
that lies within mid to high end economic segment of the society.
Geographic
segments of the company include - Southeast Asia, North Asia, South Asia,
Middle East and parts of Europe and Australasia.
TARGET MARKET
Malaysia Airline provides domestic and
international flight services. Major portion of the customers are international
flight customers. It is actually show that MAS have a certain target market
with high income.
THE MARKETING MIX ANALYSIS OF MALAYSIA
AIRLINES
01. PRODUCT
Malaysian offers three travel classes on its
international flight services including
Economy Class & Business
Class
First Class
Domestic services within Malaysia typically only
feature two classes (Economy and Business).
Apart from the airline, the group also includes
aircraft maintenance, repair and overhaul (MRO) and aircraft handling.
2. PRICE
The cost offered by MAS is more expensive than
others. As a 5 stars airline company, the costs needed for the maintenance and
convenience by MAS are quite high.
3. PLACE
MAS operate flights from its home base, Kuala
Lumpur International Airport and its secondary hub in Kota Kinabalu. MAS
operated 118 domestic routes within Malaysia and 114 international routes
across six continents.
4. PROMOTION
MAS launched the frequent flyer program called
as “Enrich Frequent Flyer Program” as a part of customer retention strategy. It
is also promote through official website. The new branding strategy slogan is
Malaysian Hospitality to emphasize the hospitality.
5. PEOPLE
Malaysia Airline maintains a strong recruitment
structure which ensures a strong marketing team which is supported by comprehensive
incentive programs to stimulate sales performance.
6. PROCESS
In conduction of successful operation of airline
service Malaysia Airline adopts Electronic
Flight Bag, Offline Field Maintenance System, and Flight Contracting &
Invoicing. Other than that they do have debit and credit card payment system
and online purchase platform to deal with customer needs.
7. PHYSICAL EVIDENCE
After completion of successful service encounter
the company maintains different service loyalty programs like – frequent flyer
program to keep long term sustainable relation with customer.
EXTERNAL
FACTOR EVALUATION OF MALAYSIA AIRLINES
|
Key External Factors
|
Weight
|
Rating
|
Weighted Score
|
|
Opportunities
|
|||
|
01. Increasing travelling demand
|
0.10
|
2
|
0.20
|
|
02. Reaching low end segment
|
0.15
|
3
|
0.45
|
|
03. Targeting the off peak seasons
|
0.10
|
2
|
0.20
|
|
04. Increasing domestic routes
|
0.15
|
4
|
0.60
|
|
Threats
|
|||
|
01. Rising fuel cost 40%
|
0.15
|
4
|
0.60
|
|
02. Natural Calamity
|
0.10
|
1
|
0.10
|
|
03. Decrease Share Price
|
0.10
|
2
|
0.20
|
|
04. Competition
|
0.15
|
3
|
0.45
|
|
|
|||
|
4 = The Response is Superior
|
Rating
|
||
|
3 = The Response is Above Average
|
|||
|
2 = The Response is Average
|
|||
|
1 = The Response is Poor
|
|||
|
Total
|
1.00
|
2.80
|
|
CPM ANALYSIS OF AIRLINES INDUSTRY
|
|
MALAYSIA
AIRLINES
|
THAI
AIRLINES
|
SINGAPORE
AIR
|
||||
|
Critical Success
Factors
|
Weight
|
Rating
|
Score
|
Rating
|
Score
|
Rating
|
Score
|
|
1.
Advertising
|
0.10
|
4
|
0.40
|
3
|
0.30
|
4
|
0.80
|
|
2. Quality
of Service
|
0.15
|
4
|
0.60
|
2
|
0.30
|
4
|
0.80
|
|
3. Price
Competitiveness
|
0.15
|
2
|
0.30
|
4
|
0.60
|
2
|
0.30
|
|
4.
Management
|
0.10
|
3
|
0.30
|
3
|
0.30
|
3
|
0.30
|
|
5. Financial
Position
|
0.15
|
2
|
0.30
|
3
|
0.45
|
3
|
0.15
|
|
6. Global
Expansion
|
0.10
|
3
|
0.30
|
3
|
0.30
|
4
|
0.40
|
|
7.
Customer Loyalty
|
0.10
|
3
|
0.30
|
2
|
0.20
|
3
|
0.15
|
|
8. Market
Share
|
0.15
|
3
|
0.45
|
4
|
0.60
|
3
|
0.45
|
|
Total
|
1.00
|
|
2.95
|
|
3.05
|
|
3.35
|
|
4 – Major
Strength, 3 – Minor Strength, 2 – Minor Weakness, 1 – Major Weakness
|
|||||||
QSPM (QUANTITATIVE STRATEGIC PLANNING MATRIX) FOR MALAYSIA
AIRLINES
|
|
Alternative 1 –
Local Market Expansion
|
Alternative 2 –
Global Market Expansion
|
||||
|
Key Factors
|
Weight
|
Attractiveness
Score
|
Total Attractiveness Score
|
Weight
|
Attractiveness
Score
|
Total Attractiveness Score
|
|
Strengths
01. Strong government support.
|
0.08
|
2
|
0.16
|
0.08
|
3
|
0.24
|
|
02. Extensive operations in other global destinations
|
0.19
|
1
|
0.19
|
0.09
|
4
|
0.36
|
|
03. Strong market share
|
0.11
|
4
|
0.44
|
0.10
|
2
|
0.20
|
|
04. Well-designed organizational structure
|
0.09
|
2
|
0.18
|
0.11
|
1
|
0.11
|
|
05. Premium brand image
|
0.06
|
3
|
0.18
|
0.09
|
3
|
0.27
|
|
Weaknesses
01. Relying Heavily on International Onward Moving Traffic
|
0.09
|
2
|
0.18
|
0.06
|
3
|
0.18
|
|
02. Expensive Administrative Expense
|
0.11
|
1
|
0.11
|
0.12
|
3
|
0.36
|
|
03. Price insensitivity to demand
|
0.10
|
1
|
0.10
|
0.18
|
2
|
0.36
|
|
04. Extensive operational cost
|
0.10
|
3
|
0.30
|
0.08
|
1
|
0.08
|
|
05. Limited growth prospect
|
0.07
|
2
|
0.14
|
0.09
|
1
|
0.09
|
|
Sum
Weights
|
100%
|
|
100%
|
|
||
|
Opportunities
01. Increasing travelling demand
|
0.09
|
4
|
0.36
|
0.08
|
4
|
0.32
|
|
02. Reaching low end segment
|
0.11
|
1
|
0.11
|
0.09
|
2
|
0.18
|
|
03. Targeting the off peak seasons
|
0.10
|
4
|
0.40
|
0.10
|
4
|
0.40
|
|
04. Increasing domestic routes
|
0.10
|
3
|
0.30
|
0.18
|
2
|
0.36
|
|
05. Medical Tourism
|
0.05
|
3
|
0.15
|
0.10
|
4
|
0.40
|
|
Threats
01. Rising fuel cost 40%
|
0.08
|
3
|
0.24
|
0.09
|
2
|
0.18
|
|
02. Global Terrorism
|
0.09
|
1
|
0.09
|
0.11
|
1
|
0.11
|
|
03. Decrease Share Price
|
0.10
|
2
|
0.20
|
0.10
|
3
|
0.30
|
|
04. Competition
|
0.18
|
1
|
0.18
|
0.10
|
3
|
0.30
|
|
05. Regulative variances on
countries
|
0.10
|
3
|
0.30
|
0.05
|
3
|
0.15
|
|
Sum
Weights
|
100%
|
|
|
100%
|
|
|
|
Sum Total Attractiveness Score
|
|
|
4.31
|
<
|
4.95
|
|
|
Attractiveness
Score: 1= Not acceptable; 2=Possibly acceptable; 3= probably acceptable; 4=Most acceptable; 0=Not relevant
|
||||||
FINANCIAL ANALYSIS
|
FINANCIAL ANALYSIS
|
RESULT
|
REMARKS
|
|
RETURN
ON ASSETS
|
-5.35%
|
Close
to industry average
|
|
RETURN
ON EQUITY
|
-49.61%
|
Slightly
below industry average
|
|
GROSS
MARGIN
|
-8.09%
|
Close
to industry average
|
|
TOTAL
ASSETS TURNOVER
|
0.70X
|
Slightly
below to industry average
|
|
FIXED
ASSET TURNOVER
|
1.00X
|
Equal
to industry average
|
|
A/R
TURNOVER
|
8.80X
|
Visibly
below than industry average
|
|
INVENTORY
TURNOVER
|
54.20X
|
Visibly
below than industry average
|
|
CURRENT
RATIO
|
0.70X
|
Below
industry average
|
|
QUICK
RATIO
|
0.70x
|
Below
industry average
|
|
TOTAL
DEBT/EQUITY
|
335.79%
|
Greater
than industry average
|
The company is found to
be under high debt pressure. As an outcome of this the company has to pay off
high interest payments on the debt and resulting added expenses and causing
loss for each year.
COMPETITOR
ANALYSIS
The major local& global competitors of
Malaysia Airlines are as follows:
|
COMPETITOR NAME
|
KEY
STRENGTH/S
|
KEY WEAKNESS/ES
|
|
|
Qatar Airways
|
Supplier
advantage
|
Little
domestic traffic
|
|
|
Singapore Airlines
|
Location
advantage
|
Expensive
service
|
|
|
Emirates Airlines
|
Global
reach of 72 countries
|
Limited
market share in each segment
|
|
|
Etihad Airways
|
Brand
visibility through active sponsorship
|
Restricted
growth
|
|
|
Biman Bangladesh
|
Local
presence
|
Operational
weakness
|
|
|
Saudi Arabian Airlines
|
Asset
Leverage
|
Staff
Turnover
|
|
|
Thai Airways
|
Most
hygienic airline service provider
|
Restricted
international routes
|
BREAK EVEN ANALYSIS
|
In Million MYR
|
2011
|
2012
|
|
2013
|
|
Revenue
|
13,653.90
|
14,286.60
|
100%
|
14,548.20
|
|
COGS
|
16,197.20
|
14,117.40
|
98.81%
|
15,683.70
|
|
Gross Margin
|
-2,543.30
|
169.20
|
1.19%
|
-1,135.50
|
|
Fixed Cost
|
9744.70
|
13,504.20
|
|
16,029.20
|
|
Break Even
Point
|
Negative GM
|
80X of GM
|
|
Negative GM
|
The company earned MYR 1.19 for each MYR Revenue
of MYR 100. In 2012 the fixed cost of the company is MYR 13,504 Million
So we have to earn (100/1.19) X 13504.20 = MYR
1134,806 Million
In percentile format, the cost equation for the
company for year 2012 would be:
Cost = 0.9881X + 13,504 Million
In percentile format, Revenue =
1X
1X
= 0.9881X + 13,504 Million
or,
X = 1134790 Million
However, traditionally, a
flight from Dhaka to Kuala Lumpur costs around MYR 1000
Meaning
the company had to ensure 1,134.79 Million or 1135 Million Flights from Dhaka
to Kuala Lumpur in a year to achieve the break even sales volume
13,504 MILLION
INDUSTRY KEY SUCCESS
FACTORS (KSFs)
TECHNOLOGY-RELATED
KSF
They have adopted technologies like
- Integrated Communication System, Interactive Voice Response System, Knowledge Portal, Official Website, Connecting Flight, and Travel Agencies across
the Globe, Airport
Booth.
MANUFACTURING-RELATED
KSFs
§ A
low cost airline is an airline that offers low fares in exchange for a “no-frills”
service.
§ That
eliminates many of the value-added services such as free meals and in-flight
entertainment
§ That
are routinely offered by full-service airlines
DISTRIBUTION-RELATED
KSFs
§ Low
distribution costs
§ Fast
delivery
LOWEST
LABOUR COSTS IN THE REGION
The low labour costs are due to a comparatively low
cost of living in Malaysia. To be competitive, MAS must maintain a cost
advantage
MARKETING-RELATED
KSFs
SkyTrax, the preeminent airline quality monitor,
awarded MAS ‘Five-Star’ status—and MAS is one of only four airlines across the
globe to have achieved this rating. In 2005, TTG designated MAS as the ‘Best
Airline to Asia’, and in January 2006, Travel Weekly, a UK-based travel
periodical, awarded MAS the same status. According to research done by the
organisation, Malaysians are found to be passionately loyal to MAS.
SKILLS
& CAPABILITY-RELATED KSFs
MAS maintenance staff, flight operations staff
and ground crew are world-class in their technical skills. The strong safety
record has much to do with the staff and crews' attention and capabilities.
STRATEGY
EVALUATION
Malaysia
Airlines evaluated the feasibility of a premium service in conjunction with
another airline. And the Inter visit as team
developed network design and revenue forecasting as part of a broader project
team.
Market
Forecasting is executed market estimate taking into account long term/top
down forecast driven by GDP growth and travel propensity of the client’s
projected markets.
Route
Design is
developed a route structure and analyzed network scenarios using sophisticated
network optimization tools.
Commercial
Workshops
are executed commercial workshops to executive management.
Reducing the operating cost by 25% increasing
sales by 15% and maintaining realistic goal is advisable to MAS in order to
overcome its challenges in upcoming five years of its operations. The efforts
on reduction process of operating cost must have to be monitored in each day to
achieve the profitability of the company.
CONTINGENCY PLAN
Malaysian Airline has been
suffering from image crisis for several incidents and they had a decline of
sales. The company must have to reduce
the operating cost by 25% in
increasing its profitability in the longer run.MAS should focus on regional routes within four hours from
Kuala Lumpur, including to destinations in Southeast Asia, the Indian
subcontinent and greater China. To make the plan more realistic, they have to
come up with realistic goal of cost cutting by 25% in two years It is advisable to MAS to come up with acquisitions and
mergers to enhance the usage of the idle aircrafts in upcoming five years from 2014 to 2019 of its operations..The
mission of MAS is achieving the leading position with service and it is only
possible if the company manages to outdo their competitors by achieving
economies of scale and cost leadership in the market.
RECOMMENDATION
Apply the image of PREMIUM brand to the price
sensitive customers and attract them with low pricing service offerings and
exploit the huge market potential of low end segmented customers outside
Malaysia. Apply the advantage of government support to minimize the regulative
threats
Adopt the opportunity of increasing services in
the local route and reducing the weakness of low business operation in the
local market.
Here EFE matrix shows that their score is 2.80
.Where the rate should be 2.50 to 3.50 .
So the organization should maximize the utilization of their opportunity. The average on-time
percentage for all airlines is approximately 76.37%. Where the Malaysian
airlines on time percentage rate is 69.29%. So the organization should improve
their punctuality on flight.
Need to continually optimize portfolios
(packages) to reduce risk and increase return. Recently they face some external
threats where they have no control Like increase of fuel cost for Iraq war,
plan crash (MH17). So they should overcome their internal weakness like
operational cost
CONCLUSION
The airlines industry’s cycle appear to be
closely linked to the world economic climate. When growth in the world economy
slows down, the growth of demand for air traffic and for air freight also slows
down.
During a period when average fares will continue
to decline, control and reduction of cost in all areas becomes critical and
continuous necessity. In this process cutting labour costs is the key for two
reasons; first because it is the largest single input cost over which
management has some control; second, because differences in labour wage rates
and productivity are a major factor in differentiating operating costs between
competing airlines. Thus, reducing labour costs and increasing the productivity
of labour form another major challenge in the industry.
Although the Malaysia Airlines suffered a great
loss but strong leadership and proper planning can successfully turn their
losses to profit.
REFERENCES
ü Fred.
R David, Strategic Management: Concepts and Cases (13/e) Pearson Prentice Hall
ü Exercise Book
( Back –Up) , University of Oxford British Council , U.K.
ü Annual
Reports. (2014). Malaysia Airlines. Available:
ü Malaysia
Airlines Official Website .
Available: http://www.malaysiaairlines.com/com. Last accessed 15th Jul 2014.
ü Bloomberg.
(2014). malaysian airline system bhd (MAS:Kuala Lumpur). Available:
http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=MAS:MK.
Last accessed 19th Jul 2014.
ü CAPA.
(2013). Malaysia Airlines 2013 outlook clouded by increasing competition and
launch of Malindo. Available:
http://centreforaviation.com/analysis/malaysia-airlines-2013-outlook-clouded-by-increasing-competition-and-launch-of-malindo-99945.
Last accessed 15th Jul 2014.
ü info/our_story/about-us.html.
Last accessed 14th Jul 2014.
ü SIDHU.
B.K. (2005). Idris Jala takes up hot
seat at MAS . Available:
http://www.thestar.com.my/story.aspx/?file=%2f2005%2f12%2f2%2fnation%2f12757831&sec=nation.
Last accessed 14th Jul 2014.
ü UK
Essays. (2014). Marketing Plan For Malaysia Airlines. Available:
http://www.ukessays.com/essays/marketing/marketing-plan-for-malaysia-airlines-marketing-essay.php.
Last accessed 19th Jul 2014.
