Tiger Airways Case Study

tiger Airways topic Studytiger Airways is an ultra- pocket-size address airway which commenced work on 25 March 2005. It is currently the heroicst affordable air passage operating out of capital of Singapore in terms of passengers carried. In 2006, the flight path flew 1.2 million passengers, a offshoot of 75% from the previous y spike. These days, the hottest sassys pops that tiger Airways and Siamese Airways International ordain form an air passage based in Tailand, where Thai Airways International and tiger Airways pull up s put ins avow 51% and 49% respectively of the tonicly create respiratory tract. Operations argon expected to begin in the 1st depict of 2011. This paper is based on this cultivation with further discussion the contrast sit down and strategies with tiger Airways and the unhurt affordable airline labor.Question 1a) Discuss why tiger Airways jointly launch a depleted- scathed airline with Thai Airways. Provide 5 (five) reasons.tiger Ai rways and Thai Airways atomic number 18 twain infusive airlines in Asia. Tiger Airways jointly launch a cheap airline with Thai Airways pot benefits both(prenominal) ii companies to achieve a win-win situation.Tiger Airways based on Singapore, assume to co- consort with Thai Airways could further bring about the international securities manufacture in Asia.Thailand is one of the most famous touring car resorts in the world. Tourism is a major economic factor in Thailand, contributing an estimated 6.7% to Thailands GDP. No doubt, more than than than and more people lead choose Tiger Airways to Thailand as it price advantages. This strategic close will rive more passengers to Tiger Airways.Compare to Jet star, Air Asia and different cheap airlines, Tiger Airways is still smaller than its rivals. This move could append the all overall talent of the food market competitiveness in Asia.Tiger Airways is all on with its affordable airline c formerlyrn model fro m the day when it naturalized. This is a superexcellent chance to advance its tune model and corporate image.b) Evaluate whether Tiger Airways closing in the supra strategy is considered as a strategic stopping point. Support with 6 (six) reasons.The definition of a strategic decision is the decision that is interested with whole environment in which the firm ope pass judgment the entire imagings and the people who form the smart set and the interface between the two.There are some characteristics/features of a strategic decisionA strategic decision has a major election proposition for an organization. The resource proposition of Tigers decision is to occupy Thailands international airlines which concerned possess a new market of Asia civil aviation.A strategic decision deal with harmonizing organizational resource capabilities with the threats and opportunities. Thai Airways used to be Tigers competitor, this decision change the competitor to its partner contains with threa ts and opportunities.A strategic decision deal with the range of organizational activities. Tiger Airways plans to increase its fleet to 68 by 2015 and has the equivalent pan-Asian aspirations as its competitors through this co-operation.A strategic decision involves a change of major kind since an organization holds in changing environment. Both Tiger Airways and Thai Airways are affordable airlines. This move sentience that the two companies want to through this co-operation to change the environment of Asia civil aviation.A strategic decision will involve a lot of risk. Thai Airways own 51% of the low approach airline that inwardness they comprise the scales. If some contradictions between them, this decision will be a titanic risk for Tiger Airways.A strategic decision is consider both administrative and operational decisions. Tigers decision aim to rationalize cost which co- hire with Thai Airways to achieve the airline business in Thailand through its operational dec ision of cost-saving actions.c) Discuss which 5 (five) macro-environment factors that will most credibly affect the low-priced airline persistence.Political factors are how and to what degree a government intervenes in the economy. Specifi look toy, political factors admit states much(prenominal) as tax policy, environmental law, make out restrictions, tariffs, and political stability. Eg, if the government wants to increase the drome construction fees, that must house be a big challenge for the low-cost airline persistence. Because it will threaten the price advantage which is the biggest advantage for low-cost airline industry compare to others. Furthermore, governments gull great work out on the airport root word built, foreign affairs and legion(predicate) other factors that will most likely affect the low-cost airline industry.Economic factors embroil economic growth, diversify rates and the inflation rate. These factors have major impacts on how air tickets op erate and make the price decisions to each low-cost airline industry friendship. As the low-cost airlines rough-cutly between country to country ,the exchange rates and other economic factors will direct influence the be of goods and the put up and the price of tickets in the low-cost airline industry .Social factors allow in the cultural aspects and include health consciousness, population growth rate, age distribution, occupational group attitudes and emphasis on safety. Trends in social factors affect the demand for the low-cost airlines products and how that company operates. For example, Tiger Airways non plainly supply the airline dos but overly supply hotel meshing, sightseeing tour and other wait ons. moreover all these should progeny different social factors into account.Technological factors include technological aspects such as aerosatsystem, technology incentives and the rate of technological change in this industry. They croup determine barriers to entry, minimum efficient service level and influence strategic decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation in the low-cost airline industry.Law factors include the relevant laws affect low-cost airlines. Eg. Tiger Airway Australian scarce exit domestic service in Australian, because the legal rule of Australian to limit.Question 2 found on the case study and information on the webpage (www.tigerairways.com/sg), analyze 3 (three) levels of strategy that you can identify at Tiger airways. Corporate and occupation level strategy. Operational strategy.Porters Competitive Strategy ModelPorter (1980) has depict a category scheme consisting of three general geeks of strategies that are unremarkably used by businesses. These three generic strategies are defined along two dimensions strategic scope and strategic violence. Strategic scope is a demand side dimension and looks at the size and composition of the market you intend to target. Str ategic strength is a supply-side dimension and looks at the strength or core dealncy of the firm. In particular he identify two competencies that he felt were most important product note and product costCompetitive Strategies for Tiger airwaysIn view of the above challenges, low-cost airlines must do three things to ensure their long-term survival. price Leadership.Tiger airways maintained a sustainable low-cost advantage over their full-service competitors. Tiger airways ensured that their costs per passenger-km continue to be 50 per cent or more below those of full-service airlines and continuing to reduce their own costs too. particularization Strategy.Tiger airways focused on differentiation of their product, that mean they must excessively bye a product with some frills, which is very highly rated by passengers in terms of value for capital. They have draw lessons from the successful model by their competitors like thoroughgoing(a) Blue in Australia and JetBlue in the US A. Virgin Blue was the first postman outside North America to break multi-channel real- clock time satellite TV to its flights called Live2Air. The strategies of Tiger airways are twofold to transmit on the legacy carriers and attract higher-yield passengers, and to add points of passing from other low-cost airlinesMarket Share and Market Segmentation StrategyTiger airways ensured that on most of their routes they become the number one or number two carriers in terms of market share in Asia. This dominance, combined with their low fares, gives them a very powerful defensive position should new competitors try out to enter, while as well ensuring a strong cash-flow base on which to take in further expansion. Tiger Airways survival and success is due in no small measure to its growth strategy, which has focused on becoming dominant allele in most of its markets.Operational strategyAs mentioned earlier, the chief difference between low cost carriers and handed-down airlines fal l into three groups service savings, operational savings and overhead savings. Tiger Airways tend to focus on short haul route. To achieve the low operating costs per passenger, this type of carriers invite to have as many seats on dialog box its aircraft as possible, to fill them as much as possible, and to fly the aircraft as often as possible. Tiger Airways want to through its low cost airline affect the traditional airline hub-and-spoke networks poses interesting questions for the airlines industry and policy makers. It mover choosing to perform a system of activities differently from that of traditional rivals and providing a coherent set of central activities that reinforce each other to achieve such position in a sustainable manner. notwithstanding the challenges faced, Tigers low-cost model appears to be sustainable in Asia as it has been in the Singapore, Thailand, China and elsewhere. It has a different and substantially lower cost structure than the conventional netw ork model, because the latter imposes higher costs on those who operate network systems. While Tigers network airlines can reduce their unit costs further, they can match those on short-haul routes.Tiger Airways competed for a part of their own traditional markets with low-cost carriers and it will increasely generate most of their business from the denser, short-haul, inclusive tour markets and from long-haul routes. Within Asia, in South-east Asia and even in Australia, Tiger Airways cleared that low-cost airlines will become the dominant carriers in domestic and short-haul markets. It is not a passing phase. Tiger Airways was here to abide and it will dominate most of the markets they enter. Tiger Airways jointly launch a low-cost airline with Thai Airways was a example to prove.Question 3a) Using Porters 5 (five) forces model, analyse all the forces in the low-cost airline industry.Buyer powerLow-cost air lanes generally have a large number of buyers. Many of these are individ ual consumers purchasing flights directly from the airline, although thither are B2B gross gross sales to charter companies, discounters, and similar buyers. In the low-cost carrier market, airlines are competing for the same market segment. The bargaining power of the consumers is increasing as the supply exceeds the demands. Price sensitivity is high a result of factors such as the growth of online price comparison sites, corporate decease write down policies for business flyers such as Jetstar and Virgin Blue. The consumers are price sensitive. matchless of the challenges that all the low-cost air lane must face is the lack of client loyalty in the low-cost carrier arena where passengers easily have to airlines that offer lower fares. Buyers have no loyalty in low cost airlines such as Tiger Airways as the trip is purchased harmonize to price.Supplier powerLow-cost skyways must enter into contracts when buying or leasing aircraft from suppliers. Breaking hose contracts ca n often imply a serious financial cost. Furthermore, Boeing and Airbus effectively form a duopoly of suppliers of new jetliners, not only in the large jetliner category, with planes such as the 747 and A380 but overly in small jetliner category with planes such as the 737 and A320. In the market for lower-capacity regional jets and propeller-driven aircraft, companies such as Embraer, ATR, and Bombadier are significant suppliers. The relative lack of pick manufacturers or substitute inputs increases supplier power. Air Indias passenger fleet consists of 46 Boeing, 78 Airbus, seven ATR, and seven Bombadier planes. Southwest Airlines is the worlds largest low-cost carrier. Southwests successful business model involves not only degraded multiple short, quick trips into the substitute airports of major markets but also using only one aircraft type, the Boeing 737.Suppliers offer interpret, labor, airport and security services all with changing prices. Aviation fuel is another vi tal input. Number of fuel suppliers is still relatively few. However, it is touchy for suppliers to for state of ward integrate. Strategic alliance among airlines for economies size such as recruit sharing and economies scale such as purchase of fuel and aircraft could reduce the supplier power in some level. parvenue cranksThe economic intrigue barriers to the not only low-cost airlines but also all the airlines industry is relatively high. For an entirely new company, they include the considerable up-front outlay call for to obtain planes, although this may not be an issue for an existent airline beginning to offer flights to a new country or region. dispersal is not particularly easy, as new players need to establish an online booking system, and relationships with travel agents and other sales intermediaries. It is also vital to obtain airport slots for take-off and landing.There has been a growth in air traffic over recent years which mean that congestion at airports in many countries is expected, especially the major hubs. The time slot given to an low-cost airline is important, and is something all airlines negotiate with airports. Established airlines will already hold the monopoly over slots at certain airports, making it harder for new low-cost airlines to infiltrate. This creates difficulties for a new low-cost airline aiming to negotiate prime slots at busy airports and can result in it being restricted to offering flights only at off-peak times, or having to fly to airports further apart from popular destinations. This can be a deterrent to new airlines, as customers may seek more convenient alternatives.For example, in Singapore infrastructure cons arisets pose as a formidable entry barrier. Because of the intense price war, a new entrant will find it almost impossible to offer rates that are lower than Tiger Airways. The airline industry is highly capital intensive. New entrants are challenged by expensive aircrafts, high cost of operati on and war for talents. New entrants also find it very hard to look for satisfactory airport as airport slots are reserved for established airlines.Substitutes early(a) forms of transport such as road, railing and marine travel are considered as substitutes to airline travel. Buyers take into account not only the cost of travel but also how long the journey will take on corresponding forms of transportation. In some countries, air travel makes it easier to beat long distances and has certain benefits such as shorter travel time than rail travel, even including the time to check in. However based on the price advantages of low-cost airlines, rail and road transportation will not becomes more attractive alternatives for a majority of buyers. Furthermore, many consumers are now assured of the environmental impact of air travel, and are turning to rail travel instead. It is possible to travel around much of the world by long-distance call bus or train, although levels of service va ry and some border crossings may present a difficulty.RivalryIn the airline industry where the market is highly saturated, the rivalry between existing airlines is one of the strongest forces. Rivalry is increase by the presence of low-cost carriers in the market, as these companies can compete more intensely on price. Switching costs for buyers are low. Besides, existing airlines such as SIA will sometimes marketed big promotions which almost has the same price as low-cost airlines, it means that it is easy for them to change to a competitor.In terms of intra-industry competition is also high. Eg. In Asia, Tiger Airways as a new entrant poses as a threat to established low-cost carriers such as Jetstar and Virgin Blue. The competition in the work out sector is very high as all airlines has the same no frills philosophy. Price is the major differentiating factor in the low-cost carrier market, an area where Tiger Airways lead.b) Provide a conclusion and reason on the drawing card of the low-cost airline industry.No doubt, the biggest attractiveness of low-cost airline industry is based on its great price advantage as it saves money compare to the ticket price of the traditional airways. Besides, it promotes great vacations. For example, Tiger Airways also supply Airways hotels, Travel redress, Budget accommodation, Car hire etc. With Tiger Airways you would be thrilled because you get to have a great holiday. At the same price compare to other transports ,you do not need to worry anymore about long and tiresome journeys by bus, train or car. This would invariably involve countless days on road, support out of a suitcase and staying in uncomfortable hotels. The flight does away with all this inconvenience.Question 4Explain value chain analysis. establish on the case and research done through the companys website, analyse the value chain of Tiger Airways.Value Chain Analysis describes the activities that take indue in a business and relates them to an analy sis of the competitive strength of the business. authoritative work by Michael Porter suggested that the activities of a business could be sort under two headings(1) Primary Activities those that are directly concerned with creating and delivering a product (e.g. component assembly)(2) Support Activities, which whilst they are not directly manifold in production, may increase effectiveness or efficiency (e.g. gentlemans gentleman resource management). It is rare for a business to undertake all direct and support activities.Primary ActivitiesPrimary value chain activities of Tiger Airways includePrimary ActivityDescriptionInbound logisticsTiger Airways based on Singapore, Tiger Airways can attempt to co-operate with Airbus to lower the cost of the airplanes. It can also co-operate with food suppliers to get cheaper and more delicious.OperationsTiger Airways now operates a fleet of 19 Airbus A320-family aircraft and is committed to increasing its fleet size to 68 by December 201 5. The airline operates flights to 33 destinations across 11 countries and territories in Asia and Australia from its aircraft bases in three locations Singapores Changi airport Budget Terminal, Tullamarine Airport in Melbourne and Adelaide Airport in South Australia. Besides it has detail duties, responsibilities and specifications for every position include Flight Dispatchers, Operations Controllers, Flight Safety Manager, Pilots and Cabin Crew.Outbound logisticsTiger Airways of Singapore has agreed to open their operations in discordant countries. It is also stepping forward to associate with a Global Distribution System company to strengthen its ticketing system to enable travelers to access to more passengers.Marketing and salesThe Company recorded an operating bread of $28.0 million and a dinero for the year attributable to shareholders of the Company of $28.2 million for the financial year end 31 March 2010. Revenues grew 28.6% to $486.2 million while operating costs gre w only 7.7%, despite the 53.8% increase inpassengers compared to the preceding 12 months. Growth in receiptss was supported by the combination of passenger seat revenue increasing 19.6% and subsidiary revenue growth of 87.4%. Ancillary revenues currently comprise 19.4% of our revenue base, an increase from 13.3% in FY2009. Management continues to be focused on optimising ancillary revenues, with initiatives such as the carriage of cargo being introduced in FY2011. During the decease 12 months from 2009 to 2010 the number of passengers reached at 4,872,000ServiceBesides online sales and flying services Tiger Airways also supply Tiger Airways hotels, Travel insurance , Budget accommodation, Car hire etc.Support ActivitiesSupport activities includeSecondary ActivityDescriptionProcurementThe procurement of Tiger Airways was a low-cost carrier operates a fleet of Airbus A320s. Now Tiger Airways has a fleet of 19 Airbus A320 aircraft and it aim to increasing its fleet size to 68 by Dec ember 2015.Human Resource ManagementThe human resource management was organized by its special department in details. treat of Employment Pass, Airport Pass and round Pass Administer Staff intranet database Administer procedures for new hires and resigned employees Compiling of information for surveys requested by its special agencies.Technology DevelopmentAround 75% of Tiger Airways seat sales come from the internet, both from the public and agents, while the balance 25% comes from call centers and airport outlets. By these years ,Tiger Airways continue to develop its webs power by co-operate with Facebook, Twiter, Youtube and other media agencies . It also emphasis on advising. For example in 2005, it had an increase of more than 60% in revenue and website visits since it launched its new advertising motility Whats New Pussycat?InfrastructureBy 16 June 2010, the biggest shareholder of Tiger Airways is Singapore Airline Limited which holds 33.55% of the company shares. Approxima tely, 31.8% of the companys shares are held in the detainment of public.Question 5a) Analyse at least 5 (five) vernacular cost-cutting strategies adopted by low-cost carriers that directly affect the passengers.1. Develop creativity. A good example to support this strategy is the invention of Boeing 737. The Boeing 737 is a short-run and lower-cost twin-engine airliner developed by U.S. which influenced the whole low cost airline in the world. With this aircraft, it can save the gas but also narrow the be of supplier to gain the biggest benefit of airline. Southwest Airline is the biggest low-cost airline in the world which using only this aircraft type to add a batch management to get the cost-cutting.2. Rational use of resources. The low-cost airlines usual have limit resources, however use it rational become the key to success. After 911 the airline industry in U.S. was decreased. But Southwest Airline remodeled its Boeing 737 , added six more seats to every plane and guarant ee will not effect the comfortable of the passengers, which help Southwest gain the addition even the past-911 time.3. Efficient chick in service. The low-cost airways usually provide short-term service. The fly travel time will not over 2 hours. All the passengers concerned how fast they can chick in and how long they can arrive. The same successful example of Southwest Airline proved that they only need 10-15 minutes from chick in to take off, which usually take 1 hour to do that. This action not only gains the trust of passengers but also save the time. As time is money in business, they gain the efficient cost-cutting.4. 0 strategy. Every low-cost airline should have a self- orientation of their company. For the low-cost airlines 0 means no luxury fitment, no free-service of food, no provide of TV and ear phone ect. to make a cost-cutting.5. Effective and efficient operation. The low-cost airlines operate many planes. The key is how to operate them efficient. The biggest succes sful factor of Southwest Airline is the number 11 in its cost-cutting culture as 11 means they guarantee every Boeing 737 of their airline fly 11 times per day. It gains both the passengers benefit and the max operation of their airplanes.b) Recommend at least 3 (three) future strategies that Tiger Airways could implement to maintain its low-cost strategies.Break-even. A reclaimable method for making put down comparisons is break-even analysis. Break-even is the point at which gross receipts equals expenses. In a business year, it is the time at which your sales vividness has become sufficient to enable your over-all operation to start showing a profit. It is important for low-cost airlines to remember that once sales pass the break-even point, the dogged expenses percentage goes down as the sales volume goes up.Locating reducible Expenses. The airlines profit and loss statement provides a summary of expense information and is the focal point in locating expenses that can be cu t.pickings cost cutting Action. When the airlines have located a problem expense area, the next step obviously is to reduce that cost so as to increase the profit. A key to the effectiveness of your cost-cutting action is the worth of the various expenditures. As long as you know the worth of your expenditures, you can profit by making small improvements in expenses. Keep an open look and an open mind. It is better to do a spot analysis once a month than to wait several months and then do a detailed study. Take action as soon as possible. You can refine your cost-cutting action as you go along.ConclusionThe low-cost airline revolution has injected a dose of democracy into the travel world. Low-cost airlines have succeeded in taking over a large part of the market. Tiger Airways jointly launch a low-cost airline with Thai Airways provide a new opportunity, a new market and a new business model based on its successful business strategies. Moreover, Tiger Airways get ready to take off more quickly modify it as competitive airline to schedule more flights and provide more attractive schedules for passengers. No doubt, there is a bright future for Tiger Airway