Strategic Analysis of Flight Centre Limited - Case Study Example

Flight Centre Limited Code & Course Professor's name University City Date Executive summary This report is well structured with an introduction analyzing the flight industry. This is followed by an intense strategic analysis of FCL position in respect to the PESTEL, SWOT and Porters Five policy Analysis. Strategic analysis of flight industry. The discussion is then laid on the key strategic issues to be considered by the industry for its development. These issues are categorized into the limitations the organization faces and the possible solutions to these limitations. The limitations include insufficient finance, managerial problems and worker incompetence. To solve this, there is the need for employment of qualified personnel and more innovations to be adopted to increase the profits as a capital base. From the findings, conclusions and recommendations are then formulated. Table of Contents Executive summary 2 1.0 Introduction 4 2.0 PESTEL Analysis 4 2.1 SWOT Analysis. 8 2.2 Porter Five Forces Analysis 9 3.0 Recommendations 11 3.1 Conclusion 12 Appendixes 12 References 13 1.0 Introduction The Flight industry was started in the UK by young Australian guys in 1973 (Smith, 2017). Their inspiration made them formulate Top Deck Tours Company ferrying tourists around Europe using London Double-decker buses. Entrepreneurial expertise was key in its development. This industry succeeded despite insufficient capital, bus breakdown and mismanagement by other incoming individuals. Incompetent entrepreneurs perpetuated rule bending and flooding the market without proper competition strategies. There was the need for the more innovative way of captivating the market and mitigate industrial competition. As such, the group had to devise better ways to mitigate competition hence formulating air Flight Company named Flight Centre in 1981 (Smith, 2017). The Flight industry was covers global market from UK, New Zealand, Japan, USA, UAE, India, Singapore, South Africa and Canada. To maximally satisfy the demands of this global market, there is need to innovate their operational strategies and adopt more effective aircraft. Evaluation of the macro-environment of this industry is as stipulated below. 2.0 PESTEL Analysis Political Environment The Australian government generate a lot of revenue from this industry. Its performance has captivated a positive tax increment by different states governments. Immense regulations are formulated by an Australian government to govern the airlines. Imposition of heavy tax has tampered with the smooth operation of the industry. More so, for the license to be offered, strict procedures are followed making other travel companies exit the market. More than 40% of Australian tax is extracted from tour industry (Selvan et al, 2017). Licensing by different states government globally hikes the transport cost of this industry. However, the Australian government is willing to harmonize taxes and strict regulations directed to flight industry. The transport security will be commanded by the government hence safe tours being offered. Many state governments and political leaders utilize flight industries during social functions, meetings and campaigns. As such, the demand increases creating a pool for more market for the benefit of this industry. Economic Environment The decline in the global economy is being recovered by the growing economic status of developing states. The increasing emerging market is attracting more opportunity for flight industry. To boost the economic status of this industry, several business entities were formulated. Retail shops were made by Flight Centre Limited in Sydney in 1981 (Selvan et al 2017). From this business, a turnover of $ 2.5 yielded a profit of over $ 93,000. By 2012, there was an establishment of 2,500retail shops in 11 states. By so doing, over $ 13b turnover comprising 34 diverse brands earned a return of $ 294m (Selvan et al, 2017). There was an establishment of offering lower airfares in 2011, A$ 10m. This was precarious to the airlines though advantageous to the clients. However, this industry disregarded it and entrenched on the older fare charges, moderate to the clients favorable to the industry. As such, the economic balance existed hence standardizing profits which are directly proportional to the tax pay in a given economy. Social-Demographic Environment The main element of flight industry is the spatial distribution of customers globally in terms of gender and gender. Technological advancement in relation to globalization has exposed many people in industrializing world embrace this industry. This has cropped up the aspect of increased market for sales of services and its products. Up against, more flight industries being formulated has posed an increased competition in the market. The prices become unsteady captivating law returns. Distribution and marketing efforts are to be reinforced to command a bigger portion of the market. The ageing lot of the market affect this industry because of health issues. Most of the travelers range between 18-65 years. Notably, increased social functions like ceremonies, meetings and international relations are the key perpetrators of Flight industry. Out of this, 55% of the travelers constitute of the male gender postulating gender imbalance in the industry. Research programs make much youth in different education programs to use the flights. This increases the market for this industry globally without the physical appearance. Technological environment Flight industry has adopted technical innovation in its operation, the main focus being in the ICT integration. This has made it easy for more than 34 brands in this industry operate independently (McIntyre et al 2016). Booking is done online, making it easy for the travelers secure space in any given flight centers globally. Creation of customer care desks in different departments offer up to date services to the customers. Easy chairs and entertainment gadgets offer extra comfort to the customers attracting more travels annually. A huge challenge for the company, according to Turner is to improve productivity. As such, there is the need for the improved database, clever usage of ICT and better performance measurements. There is the need for increased hyper-stores where different teams perform different roles. Increased IT, widens global market through adverts on social sites like Instagram, vibe, Facebook and other broadcasting houses e.g. CNN and BBC. This cuts across global network in the internet attracting a wide market for this industry and the businesses in it. Environmental Analysis The environment is a key facilitator of travel as it offers airways and space for industrial location. However, the travel business is faced with health pandemics, natural disasters and wars. Bad weather like fog and smog reduces visibility hence affecting air travel (McIntyre et al, 2016). During the process, there is the lack of communication between the air controllers in a given weather station and the pilot. Stormy conditions strike aircraft as well. This causes an increased rate of fatal accidents from the aircraft. To eradicate this conditions, fares are hiked to install sophisticated equipment's to remedy this matters. The table below displays percentage air accidents by different environmental factors. Causative agent Total accident percentage Bad weather (fog, smog, heavy rains and storms) 46% Civil and political warfare 24% Natural disasters (volcanic eruption, earthquakes) 18% Human activities (mining, construction of reservoirs) 12% (Kelso 2016) This increased accident rate demands development of many emergency call centers to safeguard the aircraft. Additionally, maintenance of the healthy level of cash reserves by companies has made it easy to manage this risks. Legal Environment There are several legal operation strategies made by flight industry. The formulated model constitute six legal elements followed by flight industry. Continuous growth at each business level Decentralized decision making by a common team. Ownership by local individuals with distinct duties Rewards and incentives to individuals are measurable on the key performances and outcome. Members are directed from decentralized teams. Team alternation is allowed. Team leaders have similar technical duties as the team members. The support teams and businesses work under brand guide in one culture, values and philosophies. For effective development Freight indstry, there is the need for micro-environment analysis. 2.1 SWOT Analysis. Strength -Well developed ICT department with effective customer care desk reaching global market. -Well outlaid laws with team based techniques to control and govern its operation. -Qualified and work motivated staff for effective working reinforced by worker seminars and workshops. This yields inventions and innovations. -More than 2,500 retail entities globally for departmental increment of profits globally. -Its central locations in the city centers of Australia, UK, UAE, USA etc., makes it enjoy successful infrastructure for customer accessibility. Weaknesses -Increased license fee and tax reduces the returns of the industry -Mismanagement of funds and poor planning disregards growth of the organization. -Fatal accidents yielded by careless piloting outpour customers from the industry. -Sources of capital are limited due to its high capital demand. Opportunities -Existence of high customer base crafted the idea to locate retail business. -Availability of qualified labor force is utilized for effective running of the industry -Available space in different states are utilized in locating retail entities globally -The CEO, Turner calls for workers decisions and critical thinking to captivate innovation and inventions. Threats -There is a tendency of loosing market due to increased flight industries worldwide -Global warming and climate change threatens tours hence reducing travels. -Increased IT, where people view places online foretell a reduced physical visit to places by tours hence reducing the market for this industry. (Evans et al, 2017) Due to the managerial problems and little capital base met by the industry, there is the need for adopting qualified workers. This will enhance more innovations and inventions in this industry creating more opportunities for a huge capital base. However managerial disputes should be solved through cumulative agreement by the managers and workers. 2.2 Porter Five Forces Analysis Suppliers bargaining power: Firms practice product differentiation to meet their distinctive needs. Workforce available demands for high pay which can only be met by industries shyly. For instance, in the Microsoft industry, workers exercise a high haggling command over manufacturers yielding the element of customization (Akman & Sokol, 2016). As such, flight industry needs highly qualified experts, specialized in distinct platforms. These type of workers are limited and more finance is employed to train more. This motivates their high bargaining power over the flight industry. A threat is posed in this sector as it depends totally on the service providers, an element that cannot be controlled easily. Buyers bargaining Power: The bargaining power of customers is low. This is due to the many customers being served by flight industry globally. Focusing on FCL, it is evident that it serves customers from Australia, UK, USA, UEA, Japan, China, Singapore, Canada, South Africa etc. (Kelso, 2016). It serves both industrialized and less developed states. For this reason, every company in this industry have the position to select which service to offer, in which state and using which mechanism. Dynamism in booking cost influences the customer bargaining power. For instance, a customer who uses online booking in interior places spends less than physical booking. An extra transportation cost is incurred for the physical bookers as compared to online booking. The bargaining power of buyers is also limited by online service provision in booking and advertisements. This crops up an intervening opportunity by the firms to elevate their operations and status in this industry. Competitive Industry Rivalry: Competition is generally extensive in any industry. Companies try to lower their fare in order to attract more customers. This was evidenced in 2012 where Australian airlines were alleged of trying to lower fare than FCL being offered directly to the public (Brassington & Colegrove, 2017). More so, the industry offer online booking with accommodation venues in airlines. The online booking individuals are given the first priority over the others regarding emergency helplines and personal attention. Many travelers will prefer booking online an aspect that disadvantage infant companies. Entertainment gadgets together with comfortable chairs in flights attracted more customers’ hence industrial growth. Increased internet advertisement widens the market for the industry. There is hence need to research and development of successful products as well as frequent industrial monitoring to curb industrial rivalry. The threat of Substitution: There exist variation in the threat of substitution in the global market. For flight industries, substitution is done in the brand base. Service provision varies depending on a given company. Rather than using jets, an option can be to use smaller planes or helicopters with small carrying capacity for customers who need urgent travel. At ground level, tour busses are used to tour those confined within a given area. Easy and viable substitution weakens the power a given company hence need to adopt a more effective product. The threat of New Entry: There is low company entrance in this industry because of diversified barriers. There is the barrier of formulating a Travel company, coming up with a license. This will consume over $ 10m. Creation of interrelationship with other industrial participants is key. A platform should be developed for any new industry. More so, there is the need for advertising services to be offered by the industry and officially launch the industry. After the entrance, the company might work under losses while testing its travel operations. The combination of these factors reduces the threat of new entrance giving an opportunity to the existing firm to make huge profits hence there growth. 3.0 Recommendations 1. Focusing on the high bargaining power of the suppliers, it is recommendable that this industry should employ and train its own workers. Training can be done through seminars and vocational workshops to outplay the suppliers' high bargaining power. 2. To solve managerial disputes, workers should be inclusive in decision-making. As such, the workers are able to adopt new changes making it easy to implement them. This will also recapitulate an element of innovation and inventions using employees' creativity. 3. To curb competition from other companies, flight companies should lower its affordable prices. This will attract many customers hence monopolizing the market. More so, better advertisement modes should be done online and via global broadcasting media like BBC and CNN to reach an international market. 3.1 Conclusion In the broader perspective, Flight industry serves the global market making easy in profit formation. The industrial macro-environment discussed clarifies the factors that affect this industry directly and indirectly. This sector in Australia explores a great advantage of tax reduction and reduced government regulation. Economic growth in the UK, US, Australia and developing state together with globalization and technological advancement makes this industry more viable. Focusing on the Porter 5 Force Analysis low substitutes threat, minimal consumers bargaining power, few entrance in the industry demarcates an opportunity for the growth of companies in this industry. Conversely, threats are detected from the high bargaining power of the suppliers with the industry's competitive nature. Generally, flight industry has many growth opportunities. The focus should be forwarded to incoming markets from Canada, Arabia, Brazil, China and India. Appendixes The acronyms used in the discussion include BBC – British Broadcasting Corporative CNN- Cable News Network FCL- Flight Centre Limited UAE- United Arabs Emirates ICT- Integrated Communications Technology Networking is the data sharing system among individuals. Therefore, it is vital for this industry and FCL Company to exercise steadfast networking system to captivate more customers. References Akman, P., & Sokol, D. D. (2016). Online RPM and MFN Under Antitrust Law and Economics. Review of Industrial Organization, 1-19. Brassington, W. D. P., & Colegrove, P. A. (2017). Alternative friction stir welding technology for titanium–6Al–4V propellant tanks within the space industry. Science and Technology of Welding and Joining, 22(4), 300-318. Evans, J. W., Groen, F., Wang, L., Austin, R., Witulski, A., Mahadevan, N. & Lindsey, N. (2017). A Framework for Reliability and Safety Analysis of Complex Space Missions. Kelso, A. (2016). UK space policy and the politics of parliamentary debate. Space Policy, 35, 43-46. McIntyre, S., Fawcett, T., Dickinson, T., Maddock, C. A., Mogavero, A., Ricciardi, L & Rengarajan, S. (2016, October). How to launch small payloads? Evaluation of current and future small payload launch systems. In 14th Reinventing Space Conference. Selvan, B., Arul, S. T., & Thamarai, N. (2017). Benchmarking for Indian Airlines Industry in Contemporary Market Scenario. Global Journal of Management And Business Research, 16(12). Smith, K. W. (2017). KWSnet Labor News/Labor Journals Index. Read More