Project Report on PIA-SM

7/28/2019 Project Report on PIA-SM

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Topic: Project Report on

PIA (Pakistan International Airline)Subject ________ Strategic Management

Class ________________ M.com 4th (x)

Submitted to

Muhammad ARSLAN Sarwar

Submitted by

Names: Roll no.

Mohammad USMAN 095

Malia Azam 113

Saira Arif 131

Chaman Iqbal 051


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PIA (Pakistan International Airline)

M.com 4th (X) Page 2

Acknowledgement

Thanks to ALLAH almighty for giving us the skill as well as we also wants to tribute to our HOLY

PROPHET Peace Be upon Him who show us the reality of God.

We would like to thank to our professorMuhammad ARSLAN SARWAR

(Strategic

Management) who have been providing guidance and support during the whole process of our

report. We feel motivated and encouraged every time we attend his lectures. Without his

encouragement and guidance this report would not have materialized.

The guidance and support received from all the group members who contributed to this report,

was vital for the success of the report. We were grateful for their constant support and help.

This report was arguably one of the most thrilling experiences in 4st

semester. Making this

report has immensely helped us in understanding the skills of Strategic management. Thanks!


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DEDICATEDTo

OurBeloved parentsMuhammad ARSLAN Sarwar

All UOGs faculty

All sweet friends, fellows and group members


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Table of Contents

1 Title2 Acknowledgement

3 Dedication

4 Introduction

5 Brief history

6Vision and mission statements

7 Internal and external assessment

8 SWOT analysis

9 Situational analysis

10 Strategies implementation

11 Matching Matrices12 Quantitative strategic planning matrix

13 Recommendations

14 Conclusion

15 References


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INTRODUCTION

Pakistan International Airlines is the national flag carrier, and as a symbol of National pride. PIA

head office is located in Karachi Airport. Principal activity of the PIAC is to provide air transport

services (passengers and freights). In addition, the corporation is engaged in providing

engineering, training, and other allied services. PIA play vital role in the growth of GDP as well

as earn sufficient foreign exchange for the country. It became member of IATA (International

Air Transport Associations) and commercial operation as a scheduled carrier for passenger and

cargo transportation.

Pakistan International Airlines Corporation (the Corporation) was incorporated on April 18,1956

under the Pakistan International Airlines Corporation Act, 1956(PIAC Act, 1956) and its shares

are quoted in all the stock exchanges of Pakistan.57 % shares held by Government of Pakistan,

and rest of 43 % shares held by Financial Institutions, Investment Companies, Individuals, Joint

Stock Companies, Foreign Companies etc. As the government is the principal owner of the

airline so the government selects the Board of Directors and the Chairman/CEO.


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Brief History

In the days when Pakistan was still in the revolting position (June 1946) Mr. Mohammad Ali

Jinnah, the Founder of the upcoming Nation, instructed Mr. M.A. Ispahani, a foremost

industrialist, to set up a national airline, on precedence basis. With his stupendous vision and

forethought, Mr. Jinnah had anticipated that with the formation of the two wings of Pakistan,

alienated by 1100 miles, a swift and well-organized mode of transport was imperative.

The novel airline was primarily a pilot project, registered in Calcutta as Orient Airways Ltd, on

23

rd

October, 1946. With A.M. Ispahani as the Chairman and Air vice Marshal O.K. Carter as theGeneral Manager of the new air hauler, operating license for the airline was obtained in 1947

with Calcutta as the base.

Orient Airways was a privately owned company, with limited capital and resources. It could not

be expected to grow and expand on its own. 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, named Pakistan International Airlines (PIA) on 11th

March, 1955.

Pakistan International Airlines established in 1954. PIA's first Super-Constellation (AP-AFQ)

registered on Apri'24, 1954. PIA started its regular service from May 10, 1954. Pakistan

International Airlines Corporation formed with merger of PIA and Orient Airways. PIA entered

the world of international aviation with a service from Karachi to London via Cairo and Rome.

Boeing 707-320 "International" introduced on the London route. First three of five Fokker F-27s

received and order placed for three Boeing 720B jet aircraft. PIA is the first Asian airline to

operate a pure jet aircraft.

At present, PIA operates to 75 destinations (38 international and 37 domestic) in countries spread

over 4 continents of the globe. One could say that since its inception in 1955, PIA has indeed,

come a long way.


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Vision and mission statements

Vision

PIAC has a vision to be a world class airline, meeting customer expectations through excellent

services, on-time performance, innovative products and absolute safety

Mission Statement analysis

PIACs mission statement is as follows

Employee teams will contribute towards making PIA a global airline of choice through

Offering quality customer services and innovative products Using state-of-the-art technologies

Ensuring cost effective measures in procurement and operations Developing safety culture

This mission statement addresses following core points of nine point mission statement analysis

Product and or service Technology Philosophy Self-concept Concern for people Concern for survival growth and profitability


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SWOT ANALYSIS OF PIA

Through the technique of "SWOT" one can analyze the present performance

conditions of any organization and its weaknesses. Also the opportunities it can grab

in the external environment and the threats it faces. This technique serves as a basefor sound recommendations and conclusions

Strength

Strengths are found in the internal environment of the organization. They are the

backbone of an organization. Strengths of an organization can over come any kind of

weaknesses that the organization is facing. PIA has a number of strengths due to

which it is still one of the leading airlines in Pakistan. These are as following

PIA has status of being Flag Carrier of Pakistan.

Highest Market Share at domestic network. Multilingual Staff on Board Booking Offices in all major cities both at domestic and International PIA has well established brand as its oldest airline in Pakistan. Subsidized fares Halal meat available at all flights. Electronic ticketing by web and through SMS. Highly Professional Staff Having Governments protection

Weaknesses

Weaknesses are also found in the internal environment of the organization.

Weaknesses if more in quantity can break down an organization easily. They can

over come the strengths as well. PIA also faces a number of weaknesses which are as

following

Old aging fleet of PIA causing higher operating cost. Huge burden of Employees which cause financial burden. Inadequate space on the aircraft Charging of higher fare as compared to competitors. Lack of marketing activities as compared to competitors.


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Poor quality of food/service on board specially in domestic flightsOpportunities

Opportunities exist in the external environment. They need to be recognized and

used according to the business being run. An opportunity recognized and utilized atthe right time will be the strength of tomorrow. Such kind of opportunities also

exists for PIA in its external environment. Some of them are as following:

PIA has huge potential market in Middle East if PIA upgrades its fleet. PIA has largest domestic network and by proper route planning PIA can generate

huge amount of Revenue with higher profit.

PTDC provides favorable market for domestic as well as international sectors forthe airline

PIA can generate more revenue by attracting customers through Web andMobile Reservations system.

Threats

Every organization faces external threats which could do damage to the business's

performance. These threats can damage the business and even could be the reason

of bankruptcy No doubt PIAC is well established and seasoned organization. Yet

there are certain threats being posed by the external environment.

Some of them are as under:

Negative rising perception about the country, regarding terrorism. Political instability and law and order situation. Rising fuel prices in the world. Over staffing at all levels Frequently rising Airlines fare Fast growing domestic and international competitors Effective promotion strategies adopted by other competitors like Emirates and

Shaheen and Air blue.

From the above SWOT analysis I came with certain conclusion about PIA. No doubt PIA has

good market for further growth and it has many advantages over many others airlines. But

PIA should upgrade its old aging fleet as it is causing the PIA major financial loss because


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fuel prices has risen in the international market and PIA has still old fleet, which causes

higher operating cost.

PESTLE ANALYSIS

This tool looks at macro environment of a firm. The macro environment affects the firms at

major level therefore it is necessary to analyze the affect of political, economic, social,

technological, legal and environmental factors on the firm.

PoliticalThe politics of South Asia and Middle East in general and politics of Pakistan in particular are

very important for PIA as its major destinations are located in these regions.

The political situation in Pakistan is not normal. In the history of Pakistan hardly one or two

governments have completed their tenures. Political instability in the country is result of

interference by non political forces. The frequently changing political environment suffer firms

operations especially the government own organizations. The new governments change the top

level management soon after taking the charge of the government and appoint people with

political background on top level of organizations without testing the required educational

qualification and relevant experience. PIA is the most politically affected organization as every

new government appointed their own people who turned a profitable organization into a loss

bearing one which stopped its growth and started journey towards decline.

EconomicThe economic condition of Pakistan is in a critical position. Economic growth is very low as

compare to other countries. The inflation rate is very high. Foreign investment is also

unsatisfactory. As PIA is operating from Pakistan, its international operations are affected by

exchange rates. Oil prices are an issue for all airlines. A huge amount is being paid as fuel cost.

Increase in oil prices affected the income of PIA as well. Fuel is the main component of airlineoperations. The oil prices are increasing at a higher rate affecting the PIAs profitability. These

all economic drawbacks seriously affect the performance of PIA.

SocialPakistan is ranked among lower-middle income countries. The Pakistani model for economic

growth since independence was described above as restricted growth. Social development has


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lagged behind economic growth, resulting in unequal social development and notable

deficiencies in education, health services, sanitation, and gender equality (Khan, Omar 2004).

The society of Pakistan is moderate in accepting changes. The social changes in Pakistan are

gradually taking place. Due to globalization and advancement in information technology, the

people accept social changes occurring throughout the globe. There are two standards in our

society, one is the upper class society and the other is lower level society which is in majority.

TechnologicalThe internet has enabled PIA to keep costs low by allowing customers to book through its

website rather than through an agent. However, the web is less attractive for PIA expansion in

east domestic, as access to information technology is limited to certain areas and facility

providing activities lower the other developing countries in the region. This situation is likely to

change in the longer term.

PIA wholly depends on other agencies for exchange of their older crafts to new ones. It also

requires a huge financing system which is very difficult to it because of the economic condition

of the country as well as its own financial position. PIA is unable to buy new technology as it

costs too much. For this purpose the organization approaches to financial institution that provide

funds on their own conditions which reduces the profitability as the organization spends a huge

amount on paying interest.

LegalThe involvement of government in PIA is backed by legislation. The government uses these

powers delegated by legislation in their own interest which affects the performance of the airline.

Another drawback is its centralized system which is a time consuming practice and the important

actions cannot be taken immediately. Delays due to this centralized system create problems for

smooth operation of the airline and it causes huge losses and the organization also loses available

opportunities due to long decision making process.

Environmental

The main environmental issue facing PIA is that of policies formulated by legislation about

greenhouse emissions. The airline industry affects the environment negatively by increasing air

pollution and noise pollution. PIA uses regional airports to reduce the environmental effects on

busy airports situated in main cities of the country. Furthermore PIA has also introduced waste

disposal plan which helps in reducing pollution in the country.


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PROPOSED STRATEGY

SPACE Matrix

Internal Strategic Position External Strategic Position

Y Axis

FS+ES= -1.14

Financial Strength (FS)

ROI =+1 ROE=+1 Profitability Ratios=+2 Activity ratios=+3 Leverage Ratios=+1 Liquidity Ratio=+2 Average= +1.66

Environmental Stability (ES)

Barriers to entry=-1 Inflation=-5 Technology change=-3 Competitive pressure=-4 Demand variability=-1 Average= -2.8

X Axis

CA+IS= -0.62

Competitive Advantage (CA)

Market Share=2 Customer Loyalty=-1 Direct Flight (point to

point)=-1

Huge and Young Fleet=-2 Service Quality =-3 Management Experience

(Professionalism)=-5

Average = -2.33

Industry Strength (IS)

Growth Potential= +3 Market Entry= +1 Technology Knowhow=

+2

Financial Stability= +2 Fuel Price Stability= +1 Human resource

availability=+2

Government Support=+1 Average= 1.71


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The graph indicates the PIAC to be in Third Quadrant which is defensive strategy quadrant

Defensive Strategies

In the defensive quadrant the company may use one of the following strategies rectifying internal

weaknesses and avoiding external threats. Defensive strategies include retrenchment, divestiture,

liquidation, and concentric diversification.

Conservative

DefensiveCompetitive

Aggressive

+1 +2 +3 +4 +5 +6-1-2-3-4-5-6

+1

+2

+3

+4

+5

+6

-1

-2

-3

-4

-5

-6

(-0.62,-1.14)


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BCG Matrix (Boston Consulting group Matrix)

PIAC is the only SBU PIAC has it has an international share of 38.04% (projection based on last years

increase or decrease in share) making it a benchmark in its industry in relation to Pakistan. Domestically

the market share is 74.61(projection based on last years increase or decrease in share) making it a cash

cow.

Domestic

SBU Revenue Revenue% Profit Profit% Relative MS Growth rate

PIAC 94,563,765 100 (5,822,431) 100% 100% -0.01

PIA

M

a

r

k

e

t

G

r

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w

t

h

Relative Market Share


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Foreign

SBU Revenue Revenue% Profit Profit% Relative MS Growth rate

PIAC 94,563,765 100 (5,822,431) 100% 100% -0.05

Analysis Description

The company lies in both cases in cash cow but according to Strategic management: concepts and

cases, / tenth edition By Fred R. David if the companys growth rate is too slow and productivity is

declining then the best way to solve the problem may be in retrenchment or divestiture. In some cases

when the portfolio is strong then we can opt for diversification.

PIA

M

ar

k

et

G

r

o

w

t

h

Relative Market Share


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Internal External Matrix (IE Matrix)

The IE matrix of PIAC is as follows


The above diagram indicates that PIAC lies in the middle order of HOLD and MAINTAIN.

Inthis type of situation the company may either use market penetration or product

development. In the case of PIAC we see the market penetration is not of much use hence

product development in the form a visible and distinctive brand identity may be taken in mind.

Here product may very well be in the form of PIAC as a pure Pakistani Brand Airline.

Grand Strategy Matrix

Small Share No

Money

Strong Share or

Strong Money

Strong Share and

Strong Money

Sector Growth High

Sector Growth Low PIA


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PIACs Domestic and International share is highest in the market but the growth in this sector in couple

of last years is negative. One main important point to ponder is PIAC has financial problems these days

because of debt. In this type of situation as the diagram above indicates you have the opportunity of

strategies likes the following

Cost Reduction Add related products and services for existing customers Add new products and services for new customer base Underserved Niche (very small) Market domination Strategic partnership Joint ventures

Common Strategies

The most common strategies from above analysis have been

Cost reduction through retrenchment or divestiture Product development through concentric diversification

o For this purpose joint venture may be usedWe will further analyze them in the stage 3 of proposed strategy formulation

Proposed Strategy Formulation

Quantitative Strategy Planning Matrix (QSPM)


The QSPM clearly tells that cost reduction is the most important and first thing to do in this type of

environment cost reduction may be done in one or more than one following areas, which ever suites

best

raw material procurement logistics - inbound and outbound production ( process ,time and work study, maintenance ,automation) energy human resource ( out sourcing ) sales & marketing finance


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Raw material procurement is almost impossible in current financial condition of PIAC; no doubt PIAC is

already working on production in its case deliverance of service, Human Resource Management Is the

focus point of all the problem as far as the analysis (SWOT) goes. Sales and marketing have already been

started to develop to automation and e ticketing compromising

Proposed Strategy

We propose the retrenchment strategy or turnaround strategy by the help ofrightsizing.

Our main goal is to go through a temporary belt-tightening, which will allow the firm to pursue a growth

strategy at some future point

Structure to Strategy matchThis topic may be considered most important in this analysis and report. The structure of organization is

very important in creating resonance between people and profits. Higher benefits in form of hugeprofits and above average returns are only for organizations which have structures according to their

strategies

Main problem of PIAC is the fact that it is not adaptable in nature when it comes to change. This is to

exclude image on logo or fleet. This is greater than this this is to consider that every strategy comes with

its own proposed structure


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Recommendations There is a need to adopt a transparent method for privatization of these enterprises through

proper mechanism and plan which would boost the economy.

It will also help the government get rid of the circular debt piling up against theseinstitutions.

There is also a need to encourage both local and foreign investments in Pakistan andgive confidence to private sector to contribute its share for economic recovery of the country.

Without giving confidence to the private sector economic revival is impossible as the privatesector is engine of growth and can create employment and competition.

Conclusion

From the discussion above, it is clear that PIA is then only national airline of Pakistan. It has

developed a strategy different from those of its competitors, and that these differences directly

and indirectly contribute to its competitive advantage. PIA has reasonable opportunities along

with threats. But the frequent involvement of every government in top management of PIA

resulted in discontinuation of its strategic policies. An organization earning average profits five

years ago is now bearing huge loses.

There is a need to adopt a transparent method for privatization of these enterprises throughproper mechanism and plan which would boost the economy.

It will also help the government get rid of the circular debt piling up against theseinstitutions.

Without giving confidence to the private sector economic revival is impossible as the privatesector is engine of growth and can create employment and competition


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References1. www.piac.com2. http://tribune.com.pk/story/269007/finance-ministry-tells-pia-to-adopt-austerity-measures/3. http://www.bdoebrahim.com.pk/index.php?option=com_content&task=view&id=525&Itemid=04. www.Businessrecorder.com5. http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-

overcome-losses/

6. http://www.slideshare.net/biztekians123/strategicanalysisofpia
http://www.piac.com/http://tribune.com.pk/story/269007/finance-ministry-tells-pia-to-adopt-austerity-measures/http://tribune.com.pk/story/269007/finance-ministry-tells-pia-to-adopt-austerity-measures/http://www.bdoebrahim.com.pk/index.php?option=com_content&task=view&id=525&Itemid=0http://www.bdoebrahim.com.pk/index.php?option=com_content&task=view&id=525&Itemid=0http://www.businessrecorder.com/http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.slideshare.net/biztekians123/strategicanalysisofpiahttp://www.slideshare.net/biztekians123/strategicanalysisofpiahttp://www.slideshare.net/biztekians123/strategicanalysisofpiahttp://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.paperpkads.com/news/index.php/restructuring-strategy-adopted-by-pia-to-overcome-losses/http://www.businessrecorder.com/http://www.bdoebrahim.com.pk/index.php?option=com_content&task=view&id=525&Itemid=0http://tribune.com.pk/story/269007/finance-ministry-tells-pia-to-adopt-austerity-measures/http://www.piac.com/

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Project Report on PIA-SM

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