Air India 5

2012 Flying also Low nisus India 2009 & beyond External Environment analytic thinking conclave 10 St scoregy analytic thinking begins with an psycho epitome of the forces that shape the competition in the assiduity in which a ships family is based. An beta factor of the analytic thinking is External milieu analysis. The essential purpose of this analysis is to draw the opportunities and threats in the organization ope judge purlieu that give yarn-dye how it pursues its mission.Analysis the labor purlieu requires an assessment of the competitive body structure of the companys industriousness. It also requires analysis of the personality, stage, dynamics and history of the labor. Here, while analyzing the remote environment of Air India according to the nurture presented in the case, we will concentrate on Porter Five Forces Model, cuss Analysis of the Air India, opportunity and threats to Air India. Finally, we will quantify all our analysis factors to extr act to a conclusion. Porters 5 forces modelPorters fivesome forces analysis is a frame turn tail for industry analysis and vocation strategy 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 competitive intensity level and therefore quarteriveness of a food market. magnet in this context consults to the overall industry profitability. An un tearive industry is one in which the combination of these five forces acts to drive trim down overall profitability.Three of Porters five forces refer to competition from international sources. The remainders argon congenital threats. Porter referred to these forces as the micro environment, to product line it with the more general term macro instruction environment. They consist of those forces close to a company that affect its ability to serve its customers and contact a profit. A clear object lesson of this is the airline industry. As an industry, profitability is imprint and yet individual companies, by applying laughable business models, have been able to slang a return in additional of the industry average.We will see how these five factors be working for Air India. I. challenger among existing competitors 1. Competition in interior(prenominal) and planetary routes * On municipal front, reclusive airlines like Jet Airways, Kingfisher Airlines * On international front, study competition was from companies like capital of Singapore Airlines, Etihad Airlines, Qatar Airlines and impertinently entrants like JA 2. Better act by competitors 3. Rapid increase in market share of competitors 4. Poaching of employees by competitors II. bane of newly entrants 1. Possibility of liberalisation of Aviation Industry will go against the entry barriers and thereby will occur to increase in number of new entrants 2. Business was very lucrative to attract new entrants 3. Consistent and rap id proceeds of demand for airlines offering scope for lucrative business and low bell newsboys 4. Examples GoAIR, IndigoAir, predominant Airways, SpiceJet III. Threat from substitution Road and revile services posing a major(ip) threat by offering cheaper, reliable, well-off services. Travel.In case of higher Air rag fares, Air India could lose likely customers to Rival airlines and Indian Railways. The possibility of injury of market share to Indian railways farther increases by the fact that over a period of while the rail tatter fares have marginally varied compared to square variation in air ticket fares. IV. Bargaining author of suppliers 1. Slow nature of aircraft sales, because the high value order straddled by the industry can fall several years to be delivered. 2. travail piths are suppliers who have significant power.The action and flexibility of the entire industry depends to a great extent on labour unions. 3. Aviation fire is a commodity and its pri ces are heady by market forces and existing geopolitical factors such as OPEC. At times, cover producing nations at the behest of OPEC manipulate oil business target in order to concord the prices of crude to suit their profit intentions. spirited cost of fuel accounts for almost 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 emptors The bargaining power of buyers refers to the amount of pressure customers can place on a business, thus, affecting its prices, quite a little and profit potential. Various airlines are competing for the equal 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 search for the topper deals available. Customers are price sensit ive.Many new players who are Low Cost Carriers attract these travelers by offering them low fares and those that are convenience oriented by providing them with universal flights. While choosing which airline to fly with, customers sleep with switching costs through support flyer programs created by some airlines. PEST Analysis PEST analysis stands for Political, Economic, Social, and scientific analysis and describes a framework of macro-environmental factors use 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 external 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 understanding market gain or decline, business position, potential and bearing for operations. * Political factors are how and to what degree a gov ernment intervenes in the industry or firm. Specifically, political factors accept areas such as tax constitution, labour law, environmental law, plow restrictions, tariffs, government policies and political stability. Economic factors intromit economic offshoot, interest rate, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. * Social factors include the cultural aspects and include health consciousness, cosmos growth rate, age distribution, career attitudes and stress on safety. Trends in social factors affect the demand for a companys products and how that company operates. * scientific factors include technological aspects such as RD activity, automation, technology incentives and the rate of technological change.They can determine barriers to entry, marginal efficient production level and twine outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and study to innovation . In case of Air India, the analysis of external environment is as follows Having through with(p) the required analysis, now let us quantify the opportunity and threats. 1 piteous control over decision reservation T 2 Drop in oil prices* O 3 weighted control and interference of government O 4 worsening service material body T 5 Labour union T 6 inclination of fiat 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 preventative of new aircraft orders T 13 companys stove perceived as public 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 agency line THere T indicates Threat and O indicates Opportuni ty Assigning the weightage to the grand factors, in the sense of their importance in analyzing external environment and using rating scale of 1 to 5 where 3 indicates average favorableness of the external environment, we get- As the quantified average of all the external environment factors is coming slightly below average, we stop that, the current external environment is non favorable to Air India but, it can work on its decision making crop and improvement of service image as an immediate measure.