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MASTER OF BUSINESS ADMINISTRATION AWARDED BY NOTTINGHAM TRENT UNIVERSITY
ASSIGNMENT SUBMISSION FORM
Note: Students must attach this page to the front of the assignment before uploading to WECSERF. For uploading instructions please see the help file online Name of Student: Zubair Saleem Student Registration Number: KL102047
Module Name: Contemporary Issues In Strategic Marketing Module Number: WEC-MBA-10-0506 Assignment Title: Strategic review of Marketing Plan and Repositioning of Airline Industry Submission Due Date: 01 November, 2009 Student’s Electronic Signature: Zubair Saleem Plagiarism is to be treated seriously. Students caught plagiarizing, can be expelled from the programme
Assignment Form MBA Jan04
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EXECUTIVE SUMMARY
This piece of work broadly demonstrates the “Marketing Planning” concepts of the new era with
the review of in exorable forces to shape the airline industry with demand of the growing
markets and innovations in trends and ICT.
This report include the critical review on the past and current literature of the marketing concepts
where Market segmentation theories were seemed to be completely changed than the previous
one, Targeting was more focused to the customer demands and positioning of the industries was
now completely dreamed to follow customer satisfaction and responsiveness rather than. Under
the sections of critical literature it was tried to evaluate the best possible results and theoretical as
well practical situation through the Pros and cons, dangers and mistakes happened in practical
situations.
After having the critical review of marketing concepts, we reviewed the current trends of the
region where our selected industry (Pakistan International Airlines) is based and have flying
routes with overall review of all PESTLE factors regarding our industry and the current
situations in the region. And was followed by the overall performance review of PIA looking on
the new trends and growth in market and Marketing Mix factors to study is more deeply
regarding its current marketing decisions.
Key issues later on shown the more clear picture of the industry from internal and some external
factors by the conduct of SWOT analysis of PIA.
After having the brief study the Marketing objectives were selected for its next year performance
followed by its marketing strategies in each factor of marketing mix. Which leaded us to make
an action Plan to execute these marketing strategies successfully and control limits were given to
ensure the success of action plan
While being proactive a contingency plan was given to secure the future risk followed by the
conclusion of our report.
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CONTENTS
Executive Summary------------------------------------------------------------------------------------ 02
1.0 Critical Literature Review of Marketing Concepts--------------------------------------- 04
1.1 Market Segmentation-------------------------------------------------------------------- 04
1.2 Market Targeting------------------------------------------------------------------------- 07
1.3 Brand Positioning------------------------------------------------------------------------ 10
1.4 Marketing Mix----------------------------------------------------------------------------- 12
2.0 Current Situation and Trends ---------------------------------------------------------------- 15
3.0 Performance Review of PIA----------------------------------------------------------------- 19
4.0 Key Issues in PIA------------------------------------------------------------------------------ 24
5.0 Objectives of the firm------------------------------------------------------------------------- 26
6.0 Marketing Strategies of PIA----------------------------------------------------------------- 29
7.0 Marketing Action Plan of PIA--------------------------------------------------------------- 32
8.0 Controls of Action Plan----------------------------------------------------------------------- 35
9.0 Contingency Plan of PIA--------------------------------------------------------------------- 37
10.0 Conclusions------------------------------------------------------------------------------------ 39
11.0 References-------------------------------------------------------------------------------------- 40
Appendix 1---------------------------------------------------------------------------------------------- 42
Appendix 2---------------------------------------------------------------------------------------------- 43
Appendix 3---------------------------------------------------------------------------------------------- 44
Appendix 4 (Company Introduction)---------------------------------------------------------------- 45
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1.0 CRITICAL LITERATURE REVIEW OF MARKETING CONCEPTS
Marketing decisions always focus the following main areas and concepts whether in
corporate/traditional marketing, entrepreneurial marketing or marketing in new economy.
1.1 MARKET SEGMENTATION
“Market segmentation is the subdivision of a market into distinct subsets of customers, where
any subset may conceivably be selected as a target market to be reached with a distinct
marketing mix” (Mike Easey, 2009)
According to Thomas (2007) segmentation or division of markets or customers can base on
different factors like Geographic, Price, Media, Psychographic, Demographic, Lifestyle, Values,
Behaviors and many other multi-dimensional divisions of business markets.
But the term Market Segmentation is a much more broad concept and must be measurable,
substantial, accessible, differentiable, and actionable which leads us firstly to subdivide and
select the portions of market in different segments and then to use the best possible marketing
energy to penetrate into the best chosen segments of market.
“The purpose of segmentation is the concentration of marketing energy and force on the
subdivision (or the market segment) to gain a competitive advantage within the segment”
(Thomas, 2007)
The concept of Market segmentation was initially introduced by Adam Smith who
conceptualized it as product differentiation (Securing market shares and generalizing markets) or
penetrating to depth of market segments.
Strategies of segmentation and differentiation may be employed simultaneously, but more
commonly they are applied in sequence in response to changing market conditions. In one sense,
segmentation is a momentary or short-term phenomenon in that effective use of this strategy may
lead to more formal recognition of the reality of market segments through redefinition of the
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segments as individual markets. Redefinition may result in a swing back to differentiation (Smith
1956).
In 1967 Philip Kotler said, “A company needs to identify the market segments it can serve
effectively.” and redefined three main kinds of market segmentation strategies as below;
Source: As mentioned by Malcolm Wright & Don Esslemont, 1994
In 1991 Kotler again redefined presented the marketing strategies into three main views as given
below;
Source: As mentioned by Malcolm Wright & Don Esslemont, 1994
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Market segmentation though is very important and highly focused area for any industry or
organization to introduce any product or enter into the market.
The steps of segmentation of any market involves following main steps;
Source: As centralized by Subha Rudra, 2009
Pros & Cons of Market Segmentation
The segmentation of Homogeneous market into Heterogeneous segments has some advantages
and at the same time some disadvantages for the marketer as given below;
Select those segments which offer higher potential and which will also be amendable to the offerings of firm.
Identify the unique and distinguished features that may divide the market into segments.
Identify the current and potential customers existing in the market to be segmented.
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1.2 TARGETING
Targeting is the second stage of Segmentation, Targeting, positioning (STP) process. After the
Markets are being segmented through the Segmentation process, the marketing person will select
the particular segment or group of customers to target refers the process of “Targeting” which is
termed as critical point in marketing planning since all the marketing decisions are going to be
directed towards the satisfaction of that particular group of customers (Know this LLC, 2009).
A company focuses on the customers and selects their target market segment by keeping in sight
different factors like the Gender, Age group, Education Level, Occupation, General household
Income, Geographic, Demographic, Lifestyle, Culture, Behaviors and many other factors.
But sometimes in a practical situation the customers have different views and focuses according
to different products so the factors to be considered while targeting the segments of market also
vary from product to product and industry to industry.
But critically the process of targeting is same for all products as given in the following figure;
Source: http://www.slideshare.net/roymogg/the-online-marketing-mba-from-bizface-how-to-segment-
the-market-presentation
For example an automotive industry always tries to target their market segments on the basis of
Gender, Age groups, General Net Income, Lifestyle and behaviors etc of their focused customers
like Ferrari always focuses the Male gender of age between 18 to 35 years having high Net
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incomes and Lifestyle conscious customers and produces the fastest cars for this segment at a
prestige price.
The targeting of segment or selection of particular group of customers also uses marketing
strategies defined by Philip Kotler in 1991 as given below.
Single Product for Single Segment
In this targeting process the marketer selects one product for a single segment looking on the
particular needs of that segment and tries to satisfy its needs only known as Target Marketing.
Like Mercedez targets Prestige pricing segment, Proton was focusing the Mass market before but
with Naza targets the family segment etc.
Source: Targeting from www.scribd.com, 2009
Single Product for All Market Segments
In this phase marketer selects one general product for all segments and doesn’t focus the
particular needs but focuses the general needs of overall market generally known as Mass
marketing, like all customers drink water, all need food, all need to build the house etc.
Source: Targeting from www.scribd.com, 2009
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Different products for different segments
In this targeting process marketer selects single product for each segment and provides a variety
of products in market which satisfy needs of all selected segments and particular segment is
satisfied by particular product.
Source: Targeting from www.scribd.com, 2009
Danger of Targeting
Sometimes during targeting marketer overlook a particular segment of the market and due to this
over focusing of one or limited segments, he leaves other segments and that gives an opportunity
to the competitor and a competitive advantage which may cause heavy losses for the company.
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1.3 POSITIONING
Positioning can be defined as “ How a product (brand) is positioned in the minds of the
consumer with respect to the values with which it is differentially associated or which it owns”
(Ries & Trout, 1982)
For example Giant with tagline “Wah! So fresh for less”, Tesco with tagline “Helping you spend
less”, and Carrefour with tagline “Carrefour cares for you” are positioned as the cheap price
sellers in global market.
While according to Yoram J, 1982 Positioning is “the reason” for being of the product (brand)
that creates a place in the minds of consumers that “why he should buy the product?” and what
“the place” a product occupy in the market.
Further he elaborates the positioning as “the rank” that how does the product is fair against its
competitors for consumer in various evaluative dimensions, his behaviors and “mental attitude”
that what are cognitive, affective and action tendencies of consumer towards the product.
Positioning or brand positioning of a company or product basically is set by the organization on
the basis of many multidimensional factors that how a company wants to see its products in the
minds of its consumers like a promise of company, a need of life, pricing attractiveness on the
basis of mental capabilities of the consumers, competitors in the market, cultural values of
consumers etc.
A consumer mind is felt to be information oriented and wants to know what you are offering,
how it is more effective than your competitors, and how the product is need of their life. Also the
perceptual mapping of consumer mind is seemed to be very important while positioning the
product.
For example in the consumer mind the perceptual mapping can be as given in following figure;
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Source: Self Made
Like the above figure is for only two main factors of price and services provided by the airlines
which can be for many of other factors like food is hygienic or not, ecological, environmental,
global, cultural and many other factors.
While successful Positioning of the brand name relies on some main factors like consistency,
clarity, competitiveness and credibility.
If these four factors are not considered carefully company can lose customers and this happens
when some major marketer makes some mistakes as defined by Philip Kotler (2001) in his book
as given below;
Source: Philip Kotler, 2001, Marketing Management (12th Edition)
Confused Positioning
• Too Complicates• No consistency
Doubtful Positioning
• Low Credibility
Over Positioning
• Low Clarity• Too narrow brand
image
Under Positioning
• No competitive edge
• No clear benefits shown to customer
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1.4 MARKETING MIX
Marketing being a very important factor and one of major reason for the success of company’s
strategies have always been in discussion and is always critically cited by the business
entrepreneurs. It seems to be different focuses of different philosophers and practitioners of the
concept of marketing.
McCarthy (1964) and Philip Kotler (2001) describes four P’s of marketing mix as Product, Price,
Place and Promotion giving a Corporate/traditional concept of marketing mix, Zontanos &
Anderson (2004) introduce the four P’s as Person, Process, Purpose and Practices as an
entrepreneurial marketing mix concepts while Robinson (1991) gives four C’s marketing mix i.e.
Customers, competitors, Capabilities, and company. Where as Bennet (2000) describes five V’s
as Value, Viability, Volume, Variety and Virtue to focus while setting marketing strategies and
decisions.
Though many of the philosophers reject today’s Marketing Mix like McKenna (1991) says iy
does not contain major concepts of adaptability, flexibility and responsiveness. But today the
major components of Marketing Mix are followed from the Philip Kotler’s view of Product,
Price, Place and Promotions for the physical Products and for services three additional factors
given by Boom & Bitner (1981) i.e. People, Processes and Physical evidences are termed to
focus while analyzing and setting marketing decisions.
Considering Kotler’s view of Marketing Mix following is description of its major components.
Product
Product in terms of marketing is combination of all goods and services which are provided to the
market/customers as a package. E.g. Pizza as a product of Pizza Hut includes all the beverages,
time value of money, sales and home delivery services. Though Pizza is a service and not the
product but in marketing mix it is referred as “service products” For service like CIMB bank,
Olympia College and any Malaysian airlines.
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In terms of production concept product is a physical product while in terms of selling concept
product include other services which by alone will be termed as “service products” according to
Philip Kotler and Armstrong, 2004.
In marketing decisions product is viewed from some of its major factors as given below.
Design of Product Packaging of Product
Style of Product Variety of Product
Branding of Product Safety of Product
Quality of Product Life of Product
Pricing
Pricing is normally viewed from two key player’s perspectives of market. In which first comes
the seller perspective by which a marketer set the pricing strategy to earn profits for organization
at highest possible extent. While the second perspective is Buyer’s perspective in which a
marketer always view two main issues of Perceived value and price sensitivity.
The pricing strategies used by the companies for their marketing mix are as given below;
1. Penetration Pricing Strategy
2. Skimming Pricing Strategy
3. Expansionist Pricing Strategy
4. Prestige Pricing Strategy
5. Pre-emptive Pricing Strategy
6. Extinction Pricing Strategy.
These pricing strategies are carried out in two categories i.e. Cost oriented pricing which is done in
terms of mark up, targeted return on investment (ROI) and early cash recovery. While another is
market oriented pricing which is based on perceived value pricing and going rate pricing.
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Place
Placement of a company involves all the number of activities that make the product available to
the customer. (Philip Kotler, 2004)
The distribution of products is always based on Marketing channels and Physical channels.
Where marketing channels is termed to be an arranged system in which products move from the
production to the end user, while physical channels is termed as the co-ordination of flow of
products and offers to the members of channels and ensure the availability of adequate quantity
of goods and services to each of the channel.
Promotions
Promotions is one of the major decision of the organizations which is termed to be responsible of
sales and profitability of the company. It is basically termed as the communication of the
company to its current and potential customers regarding its company and product features and
benefits.
Pricing can also be referred as Integrated marketing communication (IMC) technique to send one
consistent and viable message to all channels of the company to have a better impact.
In promotion organizations follow different strategies based on the current situation of product
and achievement of competing edge in the market. These promotions are categorized into five
categories i.e. Sales promotion, Personal selling, Advertising campaign and Public relations.
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2.0 CURRENT SITUATION AND TRENDS
The current situations and trends whether global or in the local market can generally be defined
and classified by Economic conditions, Demographic Trends, Socio-cultural trends,
technological trends and political/legal trends of the region.
But concerning more to the marketing issues we elaborate and evaluate the situations and trends
of PIA by using some of very well known management technical models as given below;
PEST Analysis
Originally designed as a business environmental scan, the PEST analysis is an analysis of the
external/macro environment (Big picture) in which a business operates. Political, Economical,
Socio-cultural, Technological, Legal and environmental are the often factors which are beyond
the control of a business, however are important to be aware of when doing product
development, business or strategy planning. (RapidIB, 2009)
Political Factors
Pakistan international airline is 87% owned by the government of Pakistan and in this situation
political situation of Pakistan has a great influence on the industry.
Most important factor to discuss in this regards is political instability which has very weird
culture in Pakistan regarding the issues, bankruptcies, and fraud issues raised by the next
government. Which effect a lot to national interests and industrial losses of PIA.
As the industry is mainly owned by the government and generates revenue of 48% from the total
revenue of airline industries so the investments opportunities are always high and have political
and legal support by the government.
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Economical Factors
According to Central Intelligence agency reported in 2009 Pakistan’s GDP which was
maintained from 6 to 8% since 2004 to 2007 was reduced to 2.7% in 2008. This had some
contribution of Global economic recession and some because of reduction of investors due to
Afghanistan refugees operation, assassination of Benazir Bhutto, Some major Bomb blasts and
unstable governmental conditions in the region.
This also had a huge impact on the airline industry but according to PIA, 2008 in the month of
November 2008 PIA achieved highest seat utilization of 78.1% except the pilgrimage seats since
last 19 years keeping beyond the facts of afraid people and business organizations who were
running out because of Suicide bomb attack in police headquarters in Islamabad (Capital of
Pakistan), US missile attacks twice on October 9, 2008. (Wikipedia, 2008)
This can also be evaluated from the reports of Central Intelligence Agency (CIA) in which they
report the unemployment rate increased from 5.6% to 7.4% and the inflation rates increased from
7.6% to 20.3% in the end of year 2008 as compared with year 2007 figures.
Also CIA highlights that the oil consumption of Pakistan was 345,000 bbl/day in 2006 while
until 2007 the oil production was 68,670 bbl/day and Pakistan was importing 290,600 bbl/day in
2005.
These economic factors of global economic crises, governmental influence in economic
decisions, reduction in GDP %, increased unemployment and inflation rates and high imports of
oil in case of increased oil prices shows that PIA has to be very much conscious and proactive
before it faces economic meltdown.
Socio-Cultural Factors
Islamic Republic of Pakistan is a country with 95% of Muslim population which has religious
occasion of pilgrimage and each year more than 150,000 Pakistani nationals go for pilgrimage.
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The number of Haji is 159,647 as approved by the Saudi government and cited by Ministry of
religious affairs, Pakistan. This whole number of people going for pilgrimage can only chose
Pakistan international airlines as per government policies.
The main industrial sectors of Pakistan are in two main regions of Sindh and Punjab and most of
businessmen were flying within Pakistan by PIA but now their focus has been changed and they
mostly prefer budget airlines of AIR-BLUE, and SHAHEEN AIR but these budget airlines still
don’t have landing rights in almost half of the local airports therefore PIA still have quite number
of passengers for the local markets.
Another supporting social factor for our industry is the number of Pakistani nationals living
abbraod as estimated officially by Overseas Pakistani Foundation is 3 million while unofficial
sources on Wikipedia estimates it more than 7 million who travel/live abroad.
Technological Factors
PIA has always tried to improve its technological competitive advantages fleets, services
reservation and booking systems (e-booking) for customer satisfaction and competing with the
global airline industries as per latest technological innovations.
According to analysis of Zubair Naikzad (2008) PIA had 43 fleets of different categories as
classified in the following figure which are tried to be maintained with latest viable technology.
Source: http://www.scribd.com/doc/13082388/Presentation-PIA
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In some other technological factors PIA has flight entertainment systems, auto check in counters,
e-ticketing and some other systems which are continuously being enhanced and improved by the
organization as per best possible technological innovations.
Legal Factors
Being a government owned company PIA has not much threat of legal issues and have legal
landing rights on the entire domestic airports as a national airline. i.e.
While due to less fleets PIA does not cover all international countries but has landing rights to 20
other countries of Saudi Arabia, Bahrain, Kuwait, Qatar, UAE, Malaysia, Thailand, Canada,
USA, Denmark, France, Italy, Netherland, Norway, Russia, Spain, Turkey, and United Kingdom.
Environmental Factors
The ecological conditions of PIA fleets is in better condition but still need to be improved as per
customer complaints while food is hygienic as per PIA reports and customer feedbacks.
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3.0 PERFORMANCE REVIEW
Pakistan International Airline (Born with birth of Pakistan on 10th January, 1955 under PIAC
ordinance, 1955) is 16th largest airline in Asia is covering 19 major destinations of the world. PIA
is 87% government owned while 13% by other shareholders.
According to Shahmeen, 2009 PIA carries 75% of domestic passengers while the transport sector
of Pakistan accounts 10.5 of country’s GDP while 27.5% of Gross Fixed Capital Formation
(GFCP) in FY06 providing 6% of country’s total employment.
PIA “A national flag carrier” started its growth by leasing the Boeing 707 from Panam in 1960
and became first airline to fly with Boeing 777-200LR, Boeing 777-200ER, and Boeing 777-
300ER all together as an achievement.
PIA Investment Limited (PIAIL) as 99% holdings of Pakistan International Airlines owns
Roosevelt Hotel in New York, Scribe Hotel in Paris and Sky Rooms 100% owned subsidiary of
Pakistan International Airlines.
PIAIL reports revenue of $21.3 million while PIA reports net revenue of PKR 19.7 billion with
the net loss of PKR 12.60 billion with the taxation of 0.5% of revenue under minimum taxation
Finance Act, 2009 according to the quarterly reported Balance sheet for the financial year 2009.
While the report addresses “Government of Pakistan as a majority share holder has committed to
ensure the going concern status of the group at all the times.”
After having this thorough review of the industry and with the Marketing concern of our report
now we will look at all 7 P’s of PIA as a servicing corporation as classified thoroughly on the
basis of what to focus as in the following figure and reviewed briefly later on.
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Source: http://srmark.com/What-is-IMS.html
Product
The core product of PIA is passengers’ transportation while other associated products include
Cargo, Couriers (PIA Speedex) and Charters.
During the review of customer feedbacks on SKYTRAX, some practical works and PIA website
we evaluated that PIA products/services and packages include three categories of passenger
classes i.e. Business Class, Economy Plus class, and Economy Class while the services vary
class to class and in domestic and international routes.
The services mainly include comfortable and customized seats designed in Italy and Switzerland
with enough space in all classes, adequate meals, adequate soft drinks (Alcohol is allowed on
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your own), personal screens for audio and video media with limited movies and songs (Some in
English others in Urdu/Hindi), Air sickness bag, Emergency landing parachutes, leg room,
Clean cabins and toilets, Trained but not too professional crew (With a basic English
understanding), 40 kg/pax allowance on international flights, online reservations, e-ticketing,
IATA operation safety audit standardized and IOSA benchmarked safety with AIG insurance for
local travelers.
These services in all classes are same but intensity and efficiency of some services vary from
class to class and from domestic to international flights like in domestic flights meal is provided
only on routes more than 1 hour, Alcohol is not allowed as a Muslim country, 20 kg/pax baggage
is allowed etc. While PIA is still having financial burdens because of its old fleets.
Price
PIA is following Penetration pricing strategy on the basis of its potential customers, brand
position in the market and trends in the market.
In domestic market the prices of PIA are higher than its competitors while in international
market its much less than other international airlines like Malaysian airlines, British airlines ets.
While due to less prices customers have an adverse effect on its brand.
But pricing strategy of PIA is mainly affected because of government ownership and seasonal
implementation of government decisions in its pricing. Like in pilgrimage season November
2009 Company will have to fly at no profit no loss basis because of government privilege to the
Hajis.
For army personnel will have to pay 50% of the price as per government rules and regulations
while for PIA employees it provides free/rebated tickets.
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Place (Distribution)
PIA follows different channels to provide facility to its customers to reach its seats reservation,
cargo services, courier, and charter services.
The main channels of distribution include traditional based and electronic channels of different
Travel agents, offices through out the world, and electronic e-reservations.
Travel agents serves for PIA on commission based and include General sales agents (9%
commission), IATA agents (9%), and Domestic sales agents (5%), while for cargo and courier
services contains international and domestic agents.
Promotions
PIA offers special offers to the domestic market of less prices and increased services to
pilgrimage people, free gifts are provided in almost all international routes and to pilgrimage
people seasonally.
Its advertising and direct marketing online has an impact but since years they have not been
covering the local media to market its products and services. In international cities also they
don’t have a better advertising and marketing strategies as a result of their traditional product
based strategies.
Process
Starting from the first enquiry about the flight timings and air fare package to the collection of
the baggage from destination is the complete PIA travel process. Unfortunately, the PIA
struggles most in this aspect of the mix and the same factor has contributed most in the
deteriorating the positioning.
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People
An important part of any service provision is the use of appropriate staff and people. They are
visible and their presence makes it confirm that the service is there. Their interactive property
makes them the factor that may simply consolidate the customer’s perception. Same like process,
PIA has also struggled in this aspect.
Physical Evidence:
PIA, the biggest airline of the country has its presence in all major cities of Pakistan as well as
internationally. With a fleet of 43 aircrafts, airline has got enough leverage to support its
portfolio and has given a wide room to the management to design a competitive and effective
strategy.
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4.0 KEY ISSUES
After having the review of external factors (big picture) and current marketing mix of PIA, now
we will be reviewing the Key issues which PIA have and some external factors which may either
increase or decrease the efficiency of PIA.
To have review of these issues we will be using SWOT analysis for company’s current
availabilities of strategies and future capability of growing the market shares.
SWOT ANALYSIS OF PIA
SWOT of PIA has been figured out and discussed below;
Source: Self made
Strengths
PIA has a competitive advantage as government owned company, that its main hub is at Jinnah
International Airport in Karachi which is largest international gateway to Asia for Pakistan and
have heaviest traffic level.
• Increased interest rates.• Accidents.• Increase in Oil Prices.
• Growth demand in low fair.• Customers' loyalty.• Industrial Recovery.
• Government involvement.• High Trade Debt• Dependence on Pessenger
Revenue.
• Hub at main airport.• Technology Innovation• Leading Position• Operating Structure
Strengths Weaknesses
ThreatsOpportunities
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PIA incorporates the latest technology time to time as per innovations like self check in system
and e-ticketing etc which give PIA a competing edge.
PIA having 65% of the market shares in domestic routes and 48% on the international routes
which move in to Pakistan is a leading airline industry of Pakistan from domestic as well
international point of view.
PIA having superior operating structure based on its low cost fairs, high assets utilization,
employee’s efficiency and technological innovations with its Boeing and Airbus aircrafts to carry
highest number of passengers on domestic and international routes.
Weaknesses
According to the results of 2007, PIA generated 87% of its total revenue from Passenger
revenue. While only 13% was generated from its subsidiary and 100% owned hotels, Cargo
services and charters while increase in this share of their revenue can cover their fuel and other
costs.
As per Balance sheet of PIA given in Appendix 2, PIA is holding a very huge amount of trade
debt which company can circulate and generate profits on a very short period basis as trade debt
is used for recent liabilities company have to pay soon.
PIA being 87% government owned company is always termed to be liable of Government
policies because of which company is always facing losses since many years.
Opportunities
Though PIA is following low pricing strategy but still the prices are high from other local
airlines which must be focused as a growing demand of market.
With increased facilities and motivation PIA can increase its customer’s loyalty to increase their
repeat travels which is low as per the SKYTREX survey feedbacks.
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According to market analysts global airline industry will experience upturn in the next few years
due to global movement of industries and PIA can avail this opportunity by increasing demand.
Threats
According to CIA, the inflation rate is increased up to 20% from 7.6% and this may increase
more which becomes a threat of PIA because State Bank in past years is increasing interest rates
to cover the national interests.
Accidental situations can impact on the brand name of PIA which will result decreasing revenue.
Due to a number of reasons and confused situations the airline industry is facing up and downs
and even domestic terrorist issues can cause fall in the business travelers who are the key focus
of PIA to generate revenue.
In recent industry many of airline industries have faced the cases of bankruptcies because of
increasing oil prices and PIA also have this threat because already it is having losses each year
and increased prices will shift the customer focus.
5.0 OBJECTIVES FOR PIA
Before we go for the formulation of new objectives of PIA to sustain and compete in the new
era, we must have to review its current objectives which are given in Appendix 3.
After having review of general goals of PIA which were set in 1956 which still have not been
changes as PIA goal refers to be a national flag carrier with priorities of national interests and
being incorporated to the government rules.
From our review on industry performance of PIA, global trends, turbulent market trends, we
have concluded that PIA is seemed to be unsuccessful in achieving its financial goals and brand
image with less customer responsiveness.
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To sustain and compete in the domestic and international markets of new era and looking on the
research made we have set the following objectives for the industry for the year 2010 along with
its past objectives of achieving national, social, and financial goals.
Objective # 1
“By 2010, PIA will buy 2 new Boeing aircrafts to provide a competing edge to the company in
provision of best technology to its valuable customers”
The objective is being set according to bad response from the customers in STARTEX survey
and because of losses of the company.
This will help company to improve its efficiency, satisfy its customers, cover the increasing
demands as per market analysts prediction and to remove the old fleets from the organization as
a technological innovation.
Objective # 2
“PIA will increase its Passenger numbers by 10% till the end of 2010 by advertising, providing
best facilities to its current customers and using Customer Relationship Management to achieve
its long terms goals”
Due to financial losses and customer feedbacks PIA has felt its brand image as not working as
per goals of the organization and due to which repeat fairs by the customers is affected, Also due
to unavailability of CRM company is unable to decide the customers increasing demands. With
the use of these and increased facilities company intend to increase its sales in business and
international seats.
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Objective # 3
“By the end of March 2010, PIA will start its flights to 2 new destinations of South Africa and
Singapore”
With the increased fleets PIA will be able to cover more destinations and these destinations are
being set on the basis of current market needs and customer focus to these destinations which
will increase demands of PIA fleets and will help to increase number of travelers.
Objective # 4
“By start of April 2010, PIA will reposition its brand from being a low pricing airline to best
facility provider and for that will launch its advertising campaign which will include 3 domestic
Television channels i.e. PTV, GEO and KTN while the newspapers to include mainly DAWN,
KAWISH, DAILY TIMES and JUNG”
It has been felt by the industry that due to a huge gap in advertising, customers are having
negative effects for the industry which affects its brand and to reposition our brand this
advertising will be launched to give a punch on the customer mind.
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6.0 MARKETING STRATEGY FOR PIA
Considering the global trends, market growth, continuously innovative technology, increasing
customer demands and requirements PIA must change its Marketing strategies to sustain and
compete in the domestic and international market.
On the basis of required marketing strategies of the new era, statistical data reviewed in the
report, current trends of PIA and its current marketing mix, we have proposed the following
marketing strategies for each factor of marketing mix to improve the performance of PIA.
As it is proposed marketing mix so we will act as the analyst and will give suggestions in this
section.
Product
Looking on the reduced brand image of PIA, it must start an advertising campaign through
domestic media as well international media as well through internet.
For the improvement of Quality in its services, PIA must go for variety in its food,
entertainment, and other in house facilities to retain current customers and must improve its
website with easy reservation with increase in facilities in its package to attract new customers.
PIA must focus on its secondary services of Cargo and charters and improve its shipping
facilities to attract new customers and increase in sales.
Price
Current trends show that PIA is already in losses and currently following low price strategies
which is also demand of current market, so it must not go for reduction in prices but should make
people feel that they pay for what they need.
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But as we have analyzed that the seats accommodation of PIA is not more than 75% which gives
an opportunity to focus on long term goals and reduce the price to grab major share of market
and accommodate 100% passengers with increased utilization.
Place
As PIA is working since the independence of Pakistan, it has covered its distribution network to
the high extent within domestic market but still PIA has some gaps in its e-business.
To improve this PIA must not only focus on its own website but must give its links on globally
scrolled websites like Google.com and Youtube.com along with its low prices, and facilities
advertisements.
Promotions
PIA have lack of advertisements and sales promotions as per data reviewed, therefore it must go
for advertisement campaigns and sales promotions.
As we discussed in its 2010 objectives advertisement campaign will focus the local as well
international media and internet while PIA must not only think about promotions for the
customers but for its distribution channels and must give them a charm by launching policy of
some free seats on a number of seats reservations from one agent. Like if they sale 100 seats 1
seat will be given free etc.
Also it must launch some trade and visitor fairs promotions like Five days stay in Malaysia with
return ticket only in 42000 which must be set for those seats which are analyzed to be empty on
each fair of PIA to that country.
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Process
PIA becomes liable to provide the best possible services to its customers have already added the
innovated ideas of automated check in systems and e-ticketing in its process while still it seems
to be less customer response to the airline.
To improve the process PIA intends to announce the pick and drop facility to its valuable
customers to have an improved impact on its process and to achieve customer satisfaction.
People
As per our review it was evaluated that PIA employees are well trained but it proved less than
customer needs therefore PIA intend to provide the training and development facility to its
employees in order to achieve the best expertise to satisfy customer as a competitive advantage.
Physical Evidence
To increase the efficiency of the industry PIA will buy two new Boeing aircrafts to prove a
physical evidence to its customers to rely on PIA and to remove the thought of still flying with
old aircrafts.
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7.0 ACTION PLAN
To ensure the success of our proposed marketing mix and to plan the actions of organization to
attain its objectives we have proposed the following action plan.
Our Proposed action plan to gain attain our proposed marketing strategies will follow five major
steps as given in following figure and discussed below.
Source: Self Made
1. Team Building/Leadership
Before starting any thing and as the first session PIA will select three teams which will be
working on its action plans from the best expertise of the related departments. And will provide
them powers to avoid any resistance in their actions.
One team will be leading the plan while others will be reviewing the performance of the leading
team as well of the action plan.
1. Team Building/ Leadership
2. Customer Relationship Management & Improvements
3. Advertising Campaign and Branding
4. Corrective Actions
5. Following New Market
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2. CRM & Improvements
PIA though is flying on the domestic and international routes but its customers response is not
good for its brand improvement.
Customer Relationships Management will help the company to provide the data/information of
its new plans and strategies of improving facilities which will have an attractive effect on
customer mind and through this company will not only provide information and gather the
customer response/feedbacks but this will also help PIA to reposition its brand image as best
services provider airline industry.
Through the data collected by CRM, company will chose the best possible services and will not
only improve its products/services but will also remove gaps between customers to PIA with the
limitations of time and company intend to start this by start of February 2010 and will continue
till PIA achieve its objectives.
3. Advertising Campaign and Branding
Once PIA will complete its customer assessment through CRM and improvement of its
products/services during second session, it will introduce its improved products/services to its
domestic as well international customers through an advertising campaign to reposition its brand
in customer minds.
As per objectives of PIA for 2010, PIA will buy 2 new Boeing aircrafts by the end of march and
that will also support to build its brand and customers will have feelings that PIA has improved
its services and is responding to the customers.
This session will be started from start of April, 2010 and will end at June, 2010 as the main
campaign while advertising will not stop and PIA will advertise its improved services and brand
building/maintenance time to time.
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4. Corrective Actions
CRM might not reach to the overall segment of the market and this may cause reduced resources
of information collected during section 2 but once the products and services are advertised with
an invitation of taking part in continuous CRM, some other data will be in hands with response
of large segment and after advertising is done PIA will take its final corrective actions.
This will improve its products/services with the highest competing edge and will cause the
provision of more perfect products/services as per capabilities of PIA to its valuable customers.
PIA will ensure that before it goes for the new destinations as per its objectives, all the corrective
actions and repositioning must be completed by the end this session which will start July, 2010
and must end till September 2010.
5. Following the New Market
By the end of September PIA will fly to the destinations as per its objectives with an improved
environment with repositioned brand, continuous CRM and better facilities to the customers as
per new thoughts of customers.
Now as a new brand PIA will be known as responsive to the customers, best facilities provider
and will start to compete with a new competing edge of its new brand.
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8.0 CONTROLS OF ACTION PLAN
Our controls will include four major steps
Source: Self made
1. Communication and Motivation
Human resource management is always felt to be the main issue in failures of organization
strategies and plans. To avoid this risk and to build the confidence of employees PIA intend to
motivate its employees and it will be the responsibility of the leading team to communicate to all
levels of employees for provision of information and taking their suggestions as a source of
innovations.
This will continuously help the leading team to take better actions and will build an environment
of learning organization within PIA which will be helpful not only within the action plan but will
provide a competitive advantage to the organization of committed and trained workforce in new
challenges.
4. Accountibility & Reporting
3. Performance Auditing & CRM
2. Weakly Meetings
1. Communication and Motivation
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2. Weekly Meetings
Weekly meetings will be arranged within all levels of management and with the leading team to
discuss and remove the gaps from the plans and to execute it more efficiently.
This will help to take corrective actions continuously through out the action plan and will help to
have the highest possible benefits from the action plan.
3. Performance Auditing
Through performance audits PIA will continuously assess the capacity and capability of the
leading team as well their improvements in the system.
PIA is going to take a big step and its future conditions will be based on this action plan and it
can not only base on the leading team so the secondary teams will be reviewing and auditing the
performance of the leading team and performance of the action plan in order to avoid any
mistake and loss.
4. Accountability And Reporting
Through out the execution of the action plan, all three teams will be checking each others
performance as a cross function and this accountability will not only be based on the steps and
on piece of paper but will be termed to be seen in the reflection of customer responses.
While these accountability reports will be submitted to the corporate management on quarter
monthly basis to focus more efficiently and for the higher decisions and suggestions to the action
teams while will ensure the success of the plan.
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9.0 CONTINGENCY PLAN
The practical situations can change their situation and condition any time due to many affecting
factor like local governmental and national conditions, changing environmental conditions,
innovations in trends, new trends in customers, high competition rate and international economic
conditions and because of these conditions our proposed action plan for PIA can have a fall or
failure.
In the situation of failure of our plan PIA will intend to follow the following contingency plan
which will not be used as a whole to terminate the first plan but during each section of our plan if
the things went wrong, we will follow the following contingency actions.
1. During Team Building
During this session, which is completely dependent on the availability of required expertise and
motivation of employees to participate in our new brand positioning while if we do not find the
required expertise then expertise will be hired from outside the organization and if the employees
will not respond to the needs of industry, we will announce awarding system on better
performance in employee participation to achieve our goals.
2. CRM and Improvements
From the past experimentation it is believed that CRM is never failed if it is executed in its
required manner, PIA will launch its CRM with its business website and will also follow
traditional ways and will improve its services as per customer needs while if this fails to give
adequate results then PIA will launch a home to home program in which our teams will go to
main cities of Pakistan that are also destinations of Pakistan and will get the feedbacks by hand
which will require the time and then this section will be stretched for 15 more days and the next
sessions will be tried to contract.
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3. Advertising Campaign & Branding
PIAs advertising campaign will be launched through paper as well electronic media while on less
response and feel of lack achievement of brand position in customers PIA will launch some
awarding ceremonies for the best national services in the country and will also issue the
Customer loyalty cards as a first move in Pakistani airlines like the Saudi airline gives for
relaxation of weight on the loyalty basis.
4. Corrective Action
In this section the corporate management will be following the corrective actions made by the
leading team while if corporate management feel that employees doesn’t response to the new and
improved services then corporate management will involve itself to motivate the employees and
in case of failure of this session management will include one more section of Benchmarking
with the successful airlines to increase the efficiency of this section.
5. Going with the New Market
In case of any lack or failure in the end results PIA will extend its flight schedules for the new
destination and will try to evaluate the plan and will take corrective action again and will launch
the flights with highest possible efficiency.
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10.0 CONCLUSION
Pakistan International airline as the largest airline industry of Pakistan, 87% government owned,
first non-communist airline fly to China and with improved reservation and ticketing system has
a lot of opportunities to grow its business and market shares.
Due to economic instability of the region, government involvement in its decision making
processes, recent economic meltdown and many other factors have resulted losses for PIA since
many years which reach to $12.60 billions in financial year 2009.
Under these circumstances and on the basis of the trends of new era, ICT innovations, dangerous
societal conditions, negative customer response and some other global factors, we evaluated that
PIA must reposition its brand in domestic as well in international market.
PIA flies at higher prices within the country while internationally its prices are comparatively
low except some airlines like Saudi Air and Iran Air that have competitive advantage of least oil
prices due to their oil reserves.
It was concluded that PIA is flying with seats utilization of 75 to 80% which is a weakness but
PIA can use it as its strength to fill its seats and offer reduction in prices and also can launch
some tourism programs for different tourist destination like Malaysia, Singapore, Thailand etc.
Advertising campaign and improvement in services were thought to be the best future decision to
cover its losses as a long term policy and some packages on its cargo services will also reflect the
growth of industry and coverage of its expenditure in future.
The action plan for the achievement of PIA marketing strategies followed by its objectives will
lead the industry to achieve the new trends of the market and to increase its efficiency and
customer responsiveness with increased market shares, while CRM was termed to be one best
technique for PIA to achieve its goals.
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11.0 REFERENCES
Jerry W. Thomas (2007), Market Segmentation, Journal by Decision Analyst, Inc.
Smith (1956). Product differentiation and market segmentation as alternative marketing
strategies. Journal of Marketing, 20, 3-8.
Anthony R.Bennett, 2000, The five Vs-A buyer’s perspective of Marketing (A research
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Philip Kotler, 1967, Marketing Management (1st Edition). Englewood Cliffs, New
Jersey: Prentice-Hall.
Philip Kotler, 2001, Marketing Management (12th Edition), Englewood cliffs: Prentice
Hall.
Michael porter, 1980, Competitive Strategy, Free press, New York.
Vasantha Kumar N.Bhat, 1993, A Multivariate Analysis of Airline flight delays: MCB
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Ian Fillis, 2009, An Evaluation of Artistic Influences on Marketing Theory and practice:
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McCarthy, 1964, Basic Marketing, A Managerial Approach, Irwin, Homewood.
Mike Easey (2009), Fashion Marketing, Third Edition, Blackwell Publishing
Malcolm Wright & Don Esslemont, 1994, The Logical Limitations of Target Marketing,
Article of Marketing Bulletin, P-1.
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Subha Rudra, 2009, Market Segmentation, Presentation, Online, Retrieved on 13th
October, 2009 from http://www.scribd.com/doc/17173318/Market-Segmentation-Targeting-
Positioning-By-Subha-Rudra
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http://www.scribd.com/doc/11374346/Targeting
Target Marketing, 1998-2009, Know this LLC, Online, Reviewed on 15th October. 2009
from http://www.knowthis.com/principles-of-marketing-tutorials/targeting-markets/
http://www.opf.org.pk/home/investmentconference.html
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http://www.airlinemeals.net/meals/PIA.html
http://www.passengersurveys.com/Airlines/PIAPakistan.htm
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Appendix 1
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Appendix 2
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Appendix 3
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Appendix 4
PIA Introduction
Pakistan International Airline is a national carrier of Pakistan and has been an air travel pioneer
since its inception in 1955 with slogans of “Come fly with us” and “Discover the magic of PIA
experience”.
Pakistan International Airlines Corporation, more commonly known as PIA is the flag
carrier airline of Pakistan, headquartered in Karachi. It is the 31st largest airline in Asia,
operating scheduled services to 23 domestic destinations and 36 international destinations in 25
countries across Asia, Europe and North America. Its main bases are Karachi, Lahore and
Islamabad/Rawalpindi.
The airline's secondary bases include Peshawar, Faisalabad, Quetta and Multan, from which it
connects the metropolitan cities with the main bases, the Middle East and the Far East. The
airline is owned by the Government of Pakistan (87%) and other shareholders (13%).
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.