GROUP 5

Business Policy and Strategy

Rana ion A

FINAL PROJECT REPORT

GROUP MEMBERS
FAHAD IQBAL ZOHAIB BASHIR YASMEEN SADDIQ FATIMA AWAN AFZIA FAROOQ EHSAN AKHTAR L1F07MBAM2175 L1F07MBAM0085 L1F07MBAM2226 L1F07MBAM0071 L1F07MBAM2256 L1F07MBAM0115

AYESHA RAFIQUE

L1F07MBAM0062

PAKISTAN INTERNATIONAL AIRLINE

Page 3

PREFACE
All praise is to Almighty Allah for bestowing us with the wisdom to accomplish my task. The main purpose of the project is the fulfillment of the requirements of the Business Policy & Strategy course, which is the part of our study work. PIAC is the national airline of Pakistan. The information has been gathered from different sources including the web site, web pages related to the airline, personal discussion with employees, telephone discussion representatives and visit to the branch office situated in The Mall Road, Lahore. We have included all the information obtained from the mentioned sources and no part of this project has been added from own.

As regards the preparation of this project, all the topics are added in a proper sequence, starting with the table of contents, including the history, overall view, company information, management hierarchy, everything that was required for the completion of the project.

PAKISTAN INTERNATIONAL AIRLINE

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ACKNOWLEDGEMENT
We would like to offer our humble gratitude to Allah Almighty, the most Gracious and the most Merciful, who gave us strength and enabled us to achieve our goals. The topic of our project was the complete Strategic Analysis of PAKISTAN INTERNATION AIRLINE (PIA) and its impact on Pakistan. During our Project, we had to face some difficulties as data was not readily available; we had to go to PIA office to collect data after having some solid reference and then sort out relevant data for our project.

We would like to thank our kind Prof. G.AHMAD RANA for his continuous and pre- emptive and continuous support. Without his help we would not have been able to complete our project on timely manner. We are grateful to employees of various departments of PIA that helped us during our field work and helped us in making our project successful.

PAKISTAN INTERNATIONAL AIRLINE

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TABLE OF CONTENTS
INTRODUCTION
B r ie f H is to r y .. .............. .............. .............. .............. ................ ...

08 12 S itu a tio n a l A n a ly s is .................................................................. Number of Employees.... ..........................................................

O r g a n iz a tio n a l H ie ra r c h y ..... .............. .............. .............. .......... L o c a tio n o f O ffic e .............. .............. .............. .............. ............
N a tu re o f b u s in e s s ................................................................... T y p e o f o w n e rs h ip ....................................................................

13

15 16 19 19 19 21

Key players-Board of Directors.................................................. MISSION / VISION STATEMENT GOALS & OBJECTIVES EXTERNAL ASSESSMENT STEPLE Analysis........................................................................ Porters 5 forces model............................................................ BCG.......................................................................................... SWOT Analysis.......................................................................... EFE Matrix................................................................................. Competitive Profile Matrix......................................................... CORE COMPETENCIES ANALYSIS & KSF CORPORATE CULTURE STRATEGIES UNDERTAKEN AT THE Corporate Level......................................................................... Business Unit Level.................................................................... Functional Level......................................................................... MANAGEMENT STRATEGIES HRM......................................................................................... Administration......................................................................... Decision Making (Centralized Vs Decentralized)........................ Motivational & Incentive Techniques........................................ MARKET ANALYSIS Segments & Target Market...................................................... 7 Ps.......................................................................................... Market Share............................................................................ USPs......................................................................................... Competitive Analysis................................................................. Main Marketing Strategies and Marketing Positioning..............

PAKISTAN INTERNATIONAL AIRLINE 6

Page

FINANCIAL ANALYSIS Statements................................................................................ Costs / Expenditures................................................................. Profits........................................................................................ Revenues................................................................................... Ratios........................................................................................ OTHER STRATEGIES R&D........................................................................................... Procurement.............................................................................. CONTROL PROCEDURES Marketing control.................................................................... Production control................................................................... Quality control......................................................................... HR control................................................................................ Finance control......................................................................... PROBLEM SECTION Main problems according to the management.......................... Main problems according to your analysis................................ Sub problems............................................................................ STRATEGIC ALTERNATIVES Solutions to solve the problems................................................ Evaluation of the solutions........................................................ IMPLEMENTATION PLAN............................................. CONCLUSION RECOMMENDATIONS REFERENCES

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INTRODUCTION

Page 8

BRIEF HISTORY Birth of a Nation, Birth of an Airline Air transport has probably never been more important to the development of a new nation than in the case of Pakistan. In June 1946, when Pakistan was still in the offing, Mr. Mohammad Ali Jinnah, the Founder of the upcoming nation, instructed Mr. M.A. Ispahani, a leading industrialist, to set up a national airline, on a priority basis. With his singular vision and foresight, Mr. Jinnah realized that with the formation of the two wings of Pakistan, separated by 1100 miles, a swift and efficient mode of transport was imperative. Orient Airways Takes to the Skies On 23rd October 1946, a new airline was born. Initially registered as a pilot project in Calcutta, Orient Airways Ltd. had at its helm Mr. M.A. Ispahani as Chairman and Air Vice Marshal O.K. Carter as General Manager. The new carrier's base remained in Calcutta and an operating license was obtained in May 1947.

Four Douglas DC-3s were purchased from Tempo of Texas in February 1947 and operations commenced on 4th June 1947. The designated route for Orient Airways was Calcutta -Akyab-Rangoon, which also happened to be the first post-war international sector to be flown by an airline registered in India. Within two months of Orient Airways' operational beginnings, Pakistan was born. The birth of a new nation generated one of the largest transfers of population in the history of mankind.

Orient Airways, along with the help of BOAC aircraft which had been chartered by the Government of Pakistan, started relief operations and

PAKISTAN INTERNATIONAL AIRLINE

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transportation of people between Delhi and Karachi, the two capitals. Subsequently, Orient Airways transferred its base to Pakistan and established a vital link between Karachi and Dacca, the two capitals of the two wings of Pakistan. With a skeleton fleet of just two DC-3s, three crew members, and twelve mechanics, Orient Airways launched its scheduled operations in a fairy-tale manner. The initial routes were Karachi-LahorePeshawar, Karachi-Quetta-Lahore and Karachi-Delhi Calcutta-Dacca. By the end of 1949, Orient Airways had acquired 10 DC-3s and 3 Convair 240s which were operated on these routes. In 1950, it had become increasingly apparent that additional capacity would have to be inducted to cater to the growing needs of the sub-continent.

A New National Flag Carrier for Pakistan Orient Airways was a privately owned company, with limited capital and resources. It could not be expected to grow and expand independently. 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, through PIAC Ordinance 1955 on January 10, 1955. In addition to transport activities, Orient Airways had established the nucleus of overhaul and maintenance facilities and acquired trained pilots, engineers and technicians, measures which proved to be a great asset for PIA during its teething phase. PIAs First International Service The year 1955 also marked the inauguration of the fledgling airline's first scheduled international service - to the glittering, glitzy capital city of London, via Cairo and Rome. Initially, there was much criticism, as the public could not comprehend or justify the need to operate an international route when, in their opinion, other projects vital for a developing country should have been given a higher priority. However, PIA's focus was, and continues to be, to serve the Pakistani community at large. The provision of transportation to expatriates has remained one of the foremost priorities of the national airline. Moreover, PIA earned

PAKISTAN INTERNATIONAL AIRLINE

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substantial foreign exchange through international services, which it invested in the purchase of aircraft and spare parts, as fleet expansion was a grave necessity for the airline.

New Planes, New Directions, New Management In 1956, orders were placed for two Super Constellations and five Viscounts which were to be delivered in 1959. At this juncture, PIA possessed a small fleet which comprised of Convairs, Viscounts, Super Constellations and DC-3s. While Mr. M.A. Ispahani was the first Chairman of the new dynamic airline; it was the first Managing Director of PIA, Mr. Zafar-ulAhsan, who in his 4 year tenure, got the ball truly rolling and set the shape of things to come. The PIA Head Office building at Karachi Airport, which houses the entire major departments of the airline, was the brain-child of Mr. Zafar-ul- Ahsan. In fact, on his departure from the airline, the employees presented him with a silver replica of the building with the caption, "The House You Built". In 1959, the Government of Pakistan appointed Air Commodore Nur Khan as the Managing Director of PIA. With his visionary leadership, PIA 'took off' and within a short span of 6 years, gained the stature and status of one of the world's frontline carriers. In aviation circles, this period has often been referred to as the "golden years of PIA". Development, expansion, and growth were keywords that the new management was committed to. In March 1960, PIA launched its first Boeing 707 jet service on the London-Karachi-Dacca, route which later proved to be very successful. This trailblazing accomplishment resulted in PIA becoming the first Asian Airline to operate a jet aircraft, setting trends for the future. In 1961, the airline took on the mammoth task of initiating a cross-Atlantic service from Karachi to New York. By this time, PIA had placed orders for more new aircraft, which included Fokker F-27s, Boeing

PAKISTAN INTERNATIONAL AIRLINE

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720Bs and Sikorsky helicopters. Helicopter services in East Pakistan had gained momentum by 1962 and expanded to include Sylhet, Chittagong, Dacca, Comilla and Ishurdi. PIA's helicopter services carried over 70,000 passengers during the first year of operation. At the time, it was regarded as a stellar operation, equal to any other in the world. Unfortunately, due to two mishaps, the service was discontinued in 1966.

Historic Firsts and Unbroken Records In 1962, finding the upper winds forecast favourable, PIA set out to break the record for the fastest flight between London and Karachi. With representatives of FAI (Federation Aeronautique International) on board to monitor the official timings, PIA completed the flight in 6 hours, 43 minutes, 51 seconds, a record which remains unbroken to this day. In 1964, PIA achieved another historic first, regarded as major milestones in the chequered history of the airline. On 29th April, 1964, with a Boeing 720B, PIA earned the distinction of becoming the first airline from a non-communist country to fly into the Peoples Republic of China. PIA's first service to China was from Karachi to Shanghai via Canton. In 1964-65, PIA expanded its fleet further with the addition of a fourth Boeing 720B and two Fokker F-27s. Serious development had become a reality and the PIA team continued to move ahead with ambitious plans and goals for the national flag carrier. A collective pride and joyous buoyancy was pervasive within the PIA family. Riding high on the crest of success, PIA became a household name in Pakistan in the mid sixties. The war between India and Pakistan, during 1965, further tested the national airline. PIA played a major role in providing logistical support to the Armed Forces by operating special flights using Boeings, Super Constellations, and Viscounts. The Founder of the Nation, Mr. Jinnah had predicted that the Pakistan Air force would need the support of a civil airline in special circumstances, and this came into evidence during the war. In 1966, a system of feeder services linking eight new points in West Pakistan was introduced. By this time, the airline's Viscounts were proving inadequate owing to traffic growth, and had to be replaced by Tridents. The airline continued up the growth curve, receiving two Fokker F-27s, two Boeing 707s and one Trident in the following year. Style, Glamour, and Charisma Around this time, the airline saw a change in the top slot. Air vice Marshal, Asghar Khan took over the reins of PIA for a tenure of 3 years. A number of highpoints are attributed to this period. The most colourful, if not the most significant, occurrence for PIA was the introduction of a new air-hostesses' uniform designed by none other than the renowned French designer, Pierre Cardin. Taking the aviation world by storm, this move, more than any other single factor, imprinted PIA's name on the

PAKISTAN INTERNATIONAL AIRLINE

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international market. The uniforms were an instant hit, both at home and abroad. Safety Management System at PIA PIA is the first airline to get certified (initial certification) on Safety Management System (SMS) by Civil Aviation Authority CAA - Pakistan. CAA Air Navigation Order (ANO 91.0032 issued in September 2008) binds all airlines operating in Pakistan to have SMS. Well before the issuance of this ANO, PIA initiated SMS awareness and implementation in July 2008. PIA awarded initial certification on SMS in 27th February 2009 by CAA. The Pursuit of Excellence Through Technology and Quality Control Not content with a number of historic firsts under its belt, PIA made history yet again, by installing Pakistan's first computer, an IBM1401, in 1967. PIA's first Engine Overhaul Shop, located near the Head Office building, was also completed and commissioned around this time. The Ground Training School (GTS) now known as the PIA Training Centre, was first conceived and developed during 1961-62. Interestingly, training was initially imparted in the T-shaped building which has now become the PIA Dispensary, close to the Head Office building. Besides visible development and growth in traffic and revenues in the sixties, PIA added additional destinations, new equipment, and cutting-edge technology to support its ever expanding operations. A new Jet Hangar for Boeings with a supporting airframe overhaul shop was completed and commissioned in 1968. In 1970, PIA set up its own Flight Kitchen in Karachi, which caters, even today, to the national airline as well as other carriers. Over the years, with the airline's expansion and increased capacity, the need for a second Flight Kitchen became imperative. Ushering In a New Era of Growth and Development PIA heralded the nineties by donning a bright new corporate identity. Old-timers may remember the flutter that the earlier green and gold livery had created when it was first introduced in 1974. However, in keeping with the changing times, PIA introduced a smart, sporty 90's look. The familiar PIA green was reinforced with moss green and pale blue stripes were incorporated into the new corporate identity. The stripes, a universal symbol of sport, highlighted PIA's active participation and sponsorship of a diverse range of national games. PIA's players have always been at the forefront of Pakistani Cricket, Hockey, Squash, Football, Chess, Bridge, Polo and TableTennis teams. The nineties also saw the expansion of PIA's massive Hajj and Umrah operations to Pakistan's smaller cities, in addition to the major cities of Islamabad, Peshawar, Lahore, Quetta and Karachi. PIA's growth continues unabated and the airline now operates globally, covering the entire domestic landscape and international destinations spread over 4 continents. Impressive statistics for a comparatively young airline, since its inception in 1955, PIA has indeed, come a long way.
PAKISTAN INTERNATIONAL AIRLINE Page 13

SITUATIONAL ANALYSIS

Where the Company is coming from? Air transport has probably never been more important to the development of a new nation than in the case of Pakistan. In June 1946, when Pakistan was still in the offing, Mr. Mohammad Ali Jinnah, the Founder of the upcoming nation, instructed Mr. M.A. Ispahani, a leading industrialist, to set up a national airline, on a priority basis. With his singular vision and foresight, Mr. Jinnah realized that with the formation of the two wings of Pakistan, separated by 1100 miles, a swift and efficient mode of transport was imperative. Where is the company standing? PIA's growth continues unabated and the airline now operates globally, covering the entire domestic landscape and international destinations spread over 4 continents. Impressive statistics for a comparatively young airline, since its inception in 1955, PIA has indeed, come a long way. Where is the company heading in future? PIA is heading tremendously towards a bright future in a positive manner.

PAKISTAN INTERNATIONAL AIRLINE

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PAKISTAN INTERNATIONAL AIRLINE

Page 15

LOCATION OF A OFFICE HEAD OFFICE KARACHI PIA BUILDING JINNAH INTERNATIONAL AIRPORT KARACHI - 72500

REGIONAL OFFICE LAHORE PIA BUILDING NEAR WAPDA HOUSE, MALL ROAD LAHORE 44000

PAKISTAN

Page 16

PIA Booking Office Location

City KARACHI Contact details Sidco Centre, Stretchen Road, Phone 9206721 - 15 lines Fax # 5680050 Cargo Phone 5689631 - 20 lines PIA Cargo Booking Office, Shafi Court, Club Road Phone 5689631 Fax 5677106 Cargo Phone 2904/2908/2140 Quaid e Azam International Airport Phone 9043721/9042011/111-222-742 PIA Building, 49 Blue Area, Islamabad Phone 9209911 Fax 9209966 Cargo Phone 5591071 Ext. 385/9209969 Ext. 285 PIA Building, Khalifa Shujauddin Road, Lahore Phone 9036999 Fax 9202321 Cargo Phone 9202325 Cargo Fax 9202307 Opp. Sethi Masjid, Mansehra Road Phone 0992-9310254/9310256 Fax 0992-9310255 Noor Mansion, Noor Mehal Road Phone 882303/885989 Fax 0621-882305 13 Defence Officer's Colony Bannu Cantt. Phone 9270121/9270122 Polo Ground, Chitral Phone 2863/2963/2563 Cargo Phone 2863/2963/2563 London Road, Dalbandin Phone 210519 Cargo Phone 25519 11 Khan Market, Block No. 15, Quaid e Azam Road Phone 62146/64172

KARACHI

KARACHI

ISLAMABAD

LAHORE

ABBOTTABAD

BAHAWALPUR BANNU

CHITRAL DALBANDIN DERA GHAZI KHAN

PAKISTAN INTERNATIONAL AIRLINE Page 17

Fax DERA ISMAIL KHAN

62546 Circular Road Phone 9280246/9280248 Fax 9280247 Cargo Phone 9280249 26 New Civil Lines, The Mall. Phone 634131/634132/634133 / 111-786-786 Fax 677875 Cargo Phone 626001/626214/626215 Airport Road, Gwadar Phone 2222 Cargo Phone 2222 PIA Booking Office, GSR Plaza, Gilgit Phone 3390 Cargo Phone 3390 PIA Booking Office, Civic Center, Thandi Sarak. Phone 9200566 Cargo Phone 9200080 Email hdduupk@piac.com.pk Station Road, Jacobabad Phone 3686/512996 Cargo Phone 3686 Main Bazar Phone 289 Cargo Phone 289 PIA Booking Office, G.T. Road, Kharian Phone 2904/2908/2140 Cargo Phone 2904/2908/2140 Khurk Road, Khuzdar Phone 412225/412580 Cargo Phone 412225/412580 PIA Booking Office, Mianwali Phone 32887 Cargo Phone 32887 65 Abdali Road. Phone 9200937/9200938/111-786-786 Fax 9200071 Cargo Phone 9200069/9200626 PIA Booking office, Chattar, Muzaffarabad Phone 6299 Cargo Phone 6299 Kutchery Road, Nawabshah Phone 4613/4614 Fax 0241-4615 Cargo Phone 4614 Aziz Market, Ormara Phone 510/547 Cargo Phone 510/547 Tull Road, Parachinar Phone 2461/2099 Cargo Phone 2461/2099 Aslam Shah Market, Pasni Phone 210501 Cargo Phone 210501

FAISALABAD

GWADAR

GILGIT HYDERABAD

JACOBABAD JIWANI KHARIAN KHUZDAR MIANWALI MULTAN

MUZAFFARABAD NAWABSHAH

ORMARA PARACHINAR PASNI

PAKISTAN INTERNATIONAL AIRLINE Page 18

PESHAWAR QUETTA

RAHIM YAR KHAN

PIA Building, Arbab Road, Peshawar, Cantt Phone 271178/270214 Cargo Phone 271178/270214 17 Hali Road, Quetta, Cantt Phone 820901/820861 Fax 820871 Cargo Phone 820861/820441 Iqbal Complex Phone 5032 / 75432 Cargo Phone 5032 / 71132 PIA Booking Office, Rawalkot Phone 3156 5, The Mall, Rawalpindi. Phone 9272211/111-786-786 Fax 9272244 Cargo Phone 5567011 S.G.T.C. Ltd. Sui Phone 071-83092 Cargo Phone 071-83092 Faizabad Road Phone 0936-711092 /711137 Fax 711148 Cargo Phone 812053 Cargo Fax 710651 Jinnah Islamia College Road, Sialkot Phone 583701-5 Cargo Phone 583709 Address Station Road, Shikarpur Phone 512800 Cargo Phone 512809-114 Khusho Bahg, Skardu Phone 2941/3325 Cargo Phone 2291/3325 Address Khan Plaza, Minara Road, Sukkur Phone 071 - 9310494 Fax 071 - 9310491 Cargo Phone 22125 Email skzuupk@piac.com.pk Commisionery Road, Turbat Phone 413355 Cargo Phone 412322 11-A Market Road, Zhob Phone 2875/3366 Cargo Phone 2875

RAWALAKOT

RAWALPINDI

SUI

SAIDU SHARIF SIALKOT SHIKARPUR SKARDU SUKKUR

TURBAT ZHOB

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Jinnah International Airport Karachi

Allama

PAKISTAN

20

PIA Domestic Network

PIA International

PAKISTAN

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Total Number of Employees

There are total 18,500 employees working in Pakistan International Airport (PIA) which includes Board of Directors, Corporate secretary, Head of Internal Audit, Executive Management and Auditors under different departments.

Nature of Business
The nature of Pakistan international airlines is transport & services though air, and by road

Type of Ownership
They are semi- government organization. That is 80% government & 20 & private.

Board of Directors
1. 2. 3. 4. 5. 6. 7. 8. 9. CH. AHMAD MUKHTAR Minister of Defence & Chairman PIA SYED NASEER AHMAD MALIK NAZIR AHMAD MR. JAVED AKHTER LT. GEN (RETD.) SYED AKTER ALI Federal secretary Defence CAPT. MOHAMMAD AIJAZ HAROON Managing Director PIA PROF. MIAN IJAZ UL HASAN MR. MUBASHIR IFTIKHAR MR. HUSAIN LAWAI

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10. MR. SHAUKAT ALI RANA 11. MR. SALMAN SADDIQ UE Federal Secretary Finance

Corporate Secretary
1. MR. MUHAMMAD SHUAIB

Head of Internal Audit

1. MR. S FAZAL AHMAD

Executive Management
1. CAPT. MOHAMMAD AIJAZ HAROON Managing Director PIA 2. MR. ARIF MAJEED CHEIF FINANCIAL OFFICER 3. MR. IMRAN AHMAD KHAN Director procurement, logistics and Food services 4. MR. M HANIF PATHAN Director HR, Administration & coordination 5. MR. SHAHNAWAZ REHMAN Director Corporate Planning 6. MR. SALAHUDIN Director Marketing 7. AVM MUHAMMAD KAMAL ALAM SIDDIQUE Director Precision Engineering Complex 8. CAPT. SHUJA NAQVI Director Flight Operations 9. MR. SHAHID SARWAR Director Information Technology 10. MR. MUHAMMAD ZIYAD A SYED Director Finance 11. MR. DILAWAR FAREED BEG Director Training & Development 12. MR. MAQSOOD AHMAD Director Engineering & Maintenance 13. MR. S KAMRAN HASAN Director

Auditors
1. MESSRS. ANJUM, MR. ASIF, MR. SHAHID, MR. RAHMAN 2. MESSRS FORD, RHODES, SIDAT, HYDER & CO.

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Vision & Mission

Page 24

Vision
PIAs vision is to be a World class airline, meeting customer expectations through excellent services, on-time performance, innovative products and absolute safety

Mission
Employee team will contribute towards making PIA a global airline of choice through: 0 Offering quality customer service & innovative product. 0 Using state-of-the-Art Technologies 0 Ensuring cost effective measures in procurement and operations 0 Developing safety culture

PAKISTAN INTERNATIONAL AIRLINE Page 25

Goals & Objectives

Page 26

GOALS & OBJECTIVES

According to PIAC Act 1956, following are the main objectives of PIA Corporation.

0 To provide and further develop safe, efficient, adequate, economical and properly coordinated domestic as well as international air transport system. 0 To operate any air transport service or any flight by aircraft for a commercial or other purpose, and to carry all forms of aerial work. 0 To acquire, own, run, manage or participate in the running management of, any hotel or business connected therewith. 0 To provide for the instruction and training in matters connected with aircraft or flight by aircraft of persons employed or desirous if being employed either by the corporation or by other person.

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0 To promote any organization outside Pakistan for the purpose of engaging in any activity of a kind which the corporation has power to carry out. 0 To acquire, hold or dispose of any property, whether movable or immovable, or any transport undertaking. 0 To repair, overhaul, reconstruct assemble or recondition aircraft, vehicles or other machine parts, accessories owned by the corporation or by any other person.

External Assessment

Page 28

STEPEL ANALYSIS

Social Factors 0 Ethnic traffic is present on PIA 0 Language barriers are not present 0 Act of patriotism 0 High traffic on social event or Tehwars like Eid, Basant, Independence Day etc Technological Factors 0 Supply chain is not present 0 Logistics issues are there 0 Sales teams are not updated 0 No coordination of departments

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Economics Factors 0 Increase fuel prices increase tickets prices 0 Inflations creates problems 0 Market slump 0 Decreasing in middle class Political Factors 0 Political instability 0 Political pressure 0 Flying at low cost 0 Bilateral promises 0 Non profit routes Environmental Factors 0 Fuel emission 0 Green fuel Legal Factors 0 Liquor cant be served 0 Firing of employee (court issues)

PORTERS FIVE FORCES MODEL

PAKISTAN INTERNATIONAL AIRLINE Page 30

PIA

PAKIST

AN INTERN ATIONA L AIRLINE Page 31

THREAT OF A NEW ENTRANT: Barriers to entry Capital requirements are

High

Lo w

There is high threat of potential entrants to the in this business. Even there are no barriers to entry but when we look towards the capital requirement these is very high and its risky business INTENSITY OF COMPETITIVE RIVALRY: Number of competitors is Industry growth rate is Fixed cost are Storage costs are High Lo w

PAKISTAN INTERNATIONAL AIRLINE Page 32

Product differentiation is Switching costs are

There is high threat of existing rivalry. This is because exit barriers are high, fixed and storage costs are high and product differentiation is low. Another factor that strengthens the threat of existing rivalry is that the corporate stakes are high

THREATS OF SUBSTITUTE PRODUCTS: Profitability of industry producing substitute is Rate of improvement in priceperformance relationship of substitute product is

High

Low

The There is a huge threat of substitute products. There are many other companies such as air Arabia by Sharja, some by Saudia like Marhaba, Thai air ways low cost carriers and many more

BARGAINING POWER OF SUPPLIER: Importance of customer to the supplier is Differentiation of the supplier product and services is Concentration relative to buyer industry is Switching cost of the buyer are

High

low

The bargaining power of supplier is only high when we talk about the

prices of fuel which is highly important for an air

PAKISTAN INTERNATIONAL AIRLINE Page 33

industry otherwise the remaining ingredients are not effecting this industry as highly as to some other business BARGAINING POWER OF BUYER Product differentiation of supplier is Switching cost are Product differentiation are High low

The power of buyer is very high. They buy tickets form there near available point and they also buy ticket of air line which cost less to them.

BCG MATRIX FOR PIA

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Page 34

Business growth rate Pakistan air lines

This is a strategy tool that guides resource allocation decision on the basis of market share and growth rate of SBUs. The B.C.G matrix divides organizations into four different categories. These are as follows: Cash Cows: Which have high market share but low opportunity for growth 0 Stars: Which have high market share and high opportunity for growth 0 Question marks: Which have high opportunity for growth and low market share 0 Dogs: Which have low market share and low opportunity for growth. Based on these assumptions, Pakistan air lines have been classified as a cash cows because it does have a high market share which is 67

percent in the air line industry domestically and 30 percent internationally and low business growth opportunity.

SWO T ANA LYSI S

PAKISTAN INTERNATIONAL AIRLINE Page 35

Strengths 0 Point to point frequency (Lahore to London) 0 High quality services 0 People oriented Organization (No language problem) 0 Govt. sponsored organization 0 Perfect timings 0 Abroad Pakistanis prefer PIA (patriotism) 0 Healthy internal environment Weaknesses 0 Less international traffic 0 Liquor is not served so less traffic 0 Weak rewards & appraisal 0 Less effort in the field of marketing 0 High Fares 0 Over staffing (over burdened employees) 0 Lack of professionalism 0 Low salary of engineers Opportunities 0 Traffic ethnic 0 Better recruitment policy 0 Big markets available that are un served 0 Speed ex, courier service domestically can be internationally 0 Low cost carriers 0 Better training programs 0 Have an opportunity to grow and expand throughout the country Threats 0 All domestic and international carrier 0 Fluctuating petrol prices 0 Government changing 0 Barriers to investment for abroad due to country conditions 0 Time taken by embassy to accept visa 0 Terrorism 0 Busy flight schedule 0 Open sky policy 0 High amount of loan

EFE Matrix
PAKISTAN INTERNATIONAL AIRLINE Page 36

Key External Factors

Weight s

Rating

Weighte d Score

Opportunities 1. Traffic ethnic 2. Big markets available that are un served 3. Speed ex, courier service domestically can be internationally 4. Low cost carriers 5. Have an opportunity to grow and expand throughout the country Threats 6. All domestic and international carrier 7. Fluctuating petrol prices 8. Government changing 9. Barriers to investment for abroad due to country conditions 10. Time taken by embassy to accept visa 11. Restricted vise system 12. Visa rejection cases 13. Economic slump Total 0.13 0.09 0.05 0.04 0.09 4 3 2 2 4 0.52 0.27 0.10 0.08 0.36

0.08 0.03 0.05 0.07 0.08 0.07 0.10 0.12 1.00

4 3 2 2 2 2 3 3

0.32 0.09 0.10 0.14 0.16 0.14 0.30 0.36 2.80

Competitive Profile Matrix

PIA Critical Success Factors Weight s 0.13 0.15 0.07 0.20 0.15 0.10 0.09 0.10 1.00 Rating Score Aero Asia Rating Score Shaheen Rating Score

Service Quality Market Share Advertisement Customer Expectation Safety Reliability Social Responsibility Patriotism Total

3 3 2 2 3 3 3 4

0.39 0.45 0.14 0.40 0.45 0.30 0.27 0.40 2.80

1 1 1 2 3 2 2 3

0.13 0.15 0.07 0.40 0.45 0.20 0.18 0.30 1.88

2 1 1 1 2 1 2 3

0.26 0.15 0.07 0.20 0.30 0.10 0.18 0.30 1.56

SPACE MATRIX
PAKISTAN INTERNATIONAL AIRLINE Page 37

Strategic Position & Action Evaluation (SPACE) Matrix is another management tool used to help analyze a company. It can also used to determine what sort of strategy the company should undertake. The SPACE Matrix is broken down into four quadrants as being aggressive, conservative, defensive, and competitive. Additionally, the SPACE Matrix analysis functions upon two internal strategic dimensions which are financial strength (FS) and competitive advantage (CA). Besides, the SPACE Matrix methodology also studies two business external strategic dimensions such as environmental stability (ES) and industry strength (IS). The CA (values from -1 to -6) and IS (values from +1 to +6) are representing by the X-axis of the Cartesian graph whereas the FS (values from +1 to +6) and ES (values from - 1 to -6) are representing by Y- axis. After drawing these SPACE matrix graph, the overall strategic positioning of a company can be determined.

SPACE MATRIX FOR PIA

Internal strategic position Y-axis Financial Strength (FS) (score: +6 best, +1 worst)] +1: Return on Investment +1: Leverages Total y-axis score: +3.20 -1.60 = +1.60 +3: Liquidity +2: Working Capital +1: Cash Flow Average: +1.60 External strategic position Environmental Stability (score: -1 best, -6 worst) -5: Barriers to Entry -2: Inflation rates -3: Technology Changes -2: Competitive Pressure -4: Demand Variability Average: -3.20 Industry Strength (IS) (score: +6 best, +1 worst)

X-axis Total x-axis score -2.40 + 3.75 = +2.00

Competitive Advantage (CA) (score: -1 best, -6 worst) -2: Market share -2: Service Quality

+5: Growth Potential +2: Financial Stability +5: Ease of Entry into -2: Customer Loyalty & reputation Markets -5: Management Experience -1: Direct Flights Average: -2.40 Average: +3.75 +3: Technologies Know-how

PIAS SPACE MATRIX GRAPH

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(2.00, 1.60)

According to the graph above, we noticed that PIA falls into the aggressive quadrant of the SPACE Matrix. It is located at the coordinates of 2.00 for x-component and a y component of 1.60. It shows that PIA has a strong competitive position in the market with rapid growth. It is also indicates that PIA should adopt an aggressive strategy. It needs to use its internal strengths to develop a market penetration and market development strategy. Other possible strategies include product development, integration with other Airlines and also concentric diversification.

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SPACE MATRIX CONCLUSIONS

0 PIAs high reputation helps in attracting customers loyalty 0 Compete in an unstable environment 0 PIA should develop new market to various area of Pakistan as well as overseas

0 They should expand its services and products for better improvement 0 Eliminate inefficiencies and improves services quality. It can be done by doing market research to investigate unfavorable performance. Then, make full use of the resources to improve it. 0 Seek Integration Opportunities such as merger in different areas 0 Hire potential employee either from competitors or from other sources to get bigger improvement 0 Seek new and good management staffs to get a better company direction

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CORE COMPETENCIES &

KEY SUCCESS FACTORS

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CORE COMPETENCIES & KEY SUCCESS FACTORS

0 CUSTOMER EXPECTATION 0 CONVENIENCE, CARE, AFFORDABILITY 0 SERVICES Personalized, Courteous, Passionate 0 INNOVATION New Ideas, Products, Value Added Services 0 COHESIVENESS Respect for Individuals, Team work & Effective Communication 0 INTEGRITY Business Ethics, Accountability & Transparency 0 RELIABILITY Loyalty & Consistence 0 SAFETY Passengers, Employees, Environment 0 SOCIAL RESPONSIBILITY Welfare, Health & Education

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Corporate culture

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CORPORATE CULTURE
PIA is driven by the highest standards of corporate governance and social responsibility. As a public sector organization and a business leader, PIA believes in building strong relationships with customers, partners, employees, and the communities in which it operates. The organization's values are exemplified in a range of corporate initiatives designed to impact positively on the lives of multiple stakeholders. PIA practices active corporate citizenship through social services, support for non-profit organizations, medical services for employees, the promotion of sports, and educational initiatives.

PIA has institutionalized the practice of good governance by establishing a Corporate Social Responsibility Committee. The Committee provides a platform to evaluate, update, and recommend best practices as PIA continues on its mission to adhere to business ethics and stamp out corruption. Corporate Social Responsibility (CSR) is woven into the fabric of daily operations at PIA.

Our employees wholeheartedly contribute to our commitment to develop the organization, the communities in which we function, and the country. PIA is proud of its human resource as they in many ways initiate & actively participates in welfare missions. PIA is gifted with teams of professionals who pursue excellence and deliver confidence. With a Leadership that understands the true meaning of Social Accountability, PIA has been able to realize vision of social accountability.

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