- 40 Marks
CSME – Mar/Jul 2020 – L2 – Q1 – CSME – Mar/July 2020 – L2 – Q1 – Air Spirit Strategic Analysis Using Bowman’s Strategic Clock and Porter’s Five Forces
Analyze Air Spirit Limited's competitive strategy using Bowman’s Strategic Clock and Porter’s Five Forces model.
Question
Air Spirit Limited, a leading aviation company in Nigeria, is involved in passenger and cargo airline business. The company was established in 1980 and since inception, it has maintained leadership in the passenger airline business in Nigeria. The company has been able to leverage on experience, leading to efficiency in its operations which competitors have not been able to replicate. Hence, it has assumed cost leadership position in the industry. The firm currently pursues a low-price strategy and offers the lowest fare for all categories of flights (economy, business, and first class) in the market and its cargo services. Service quality of Air Spirit is adjudged by the flying public as second to none in terms of quality, efficiency, and safety with customer benefits rated above those of its rivals.
As a growth strategy, the company plans to expand its product offerings to include chartered flights. Target market includes politicians, businessmen, and high-net-worth individuals. It is estimated that the chartered flights market is growing at 10% annually. Also, the chartered flights market is currently serviced by only one company; Royal Airlines Limited, which covers only the Lagos-Abuja route. Setup cost is high, thereby providing a barrier for new entrants. The company hopes to leverage on existing competencies in the passenger and cargo market to build the best chartered flights company in the country within the next three years, offering excellent services and benefits that would be difficult to replicate by competitors. It has built a strong relationship with aircraft suppliers and maintenance contractors. This will facilitate easy access to needed inputs. It hopes to commence operations across several routes, most of which are not currently serviced by its competitor. The company believes that the capabilities obtained from the passenger and cargo airline business will enable it to offer the lowest fare in the chartered flights industry.
Required:
a. From the scenario above, use Bowman’s Strategic Clock to analyse the effectiveness of the current strategy of Air Spirit Limited in the passenger airline business. (22 Marks)
b. Using Porter’s Five Forces model, advise the management of Air Spirit Limited on the level of competition in the chartered flights market. (18 Marks)
(Total 40 Marks)
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