Strategic Management Project-Brighton

8/16/2019 Strategic Management Project-Brighton

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ASSIGNMENT COVER SHEET Surname

Shumba

First Name/sBrighton

Student Number133153

SubjetStrate!i Mana!ement

Assi!nment /"r#jet

Number

One $1%

Tut#r&s NameS'i(s'a Redd) *r

E+aminati#n VenueEast London

*ate Submitted13 May 2016

Submissi#n $% First Submissi#n,

-resubmissi#n

"#sta. Address

1 St Ge#r!e Street

Southernwood

East London

5200

[email protected]

C#ntat Numbers

!"or#$

!%ome$

!&ell$ 23 55 4

C#urse/Inta(e MA 6ear One 7an 81

*e.arati#n9 ' hereby delare that the assignment submitted is an original (iee o) wor# (rodued by mysel).

Si!nature9 -S'umba- *ate9 13 Ma) 81

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SOUTH AFRICAN AIRWAYS

2016 STRATEGIC PLAN

Presented by

Br!"t#n S"$%b&

'&y 2016

T&b(e #) C#ntents

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.ecommendation of strategic direction.......................................................................25

Marketing "!an........................................................................................................27

/uman resources "!an.............................................................................................28

$onc!usion.............................................................................................................30

Acronyms

%oE 0 %riends of Earth

SAA& South African Airways

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SA$AA 0 South African $ivi! Aviation Authority

SMS 0 Safety Management System

1'E 0 1e"artment of 'ub!ic Enter"rises

.SA 0 .e"ub!ic of South Africa

A1B& African 1eve!o"ment Bank

I) 0 Information )echno!ogy

23 02niversity of 3ohannesburg

/.1 0/uman .esource 1eve!o"ment

41'& 4ross 1omestic 'roduct

M.O 0Maintenance5 .e"air and Overhau!

Executive Summary

South African Airways ,SAA- is current!y ex"eriencing cha!!enges ranging from !oss

of market share5 negative "rofits5 !abour issues5 management cha!!enges and

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dwind!ing revenues6 )he air!ine is who!!y owned by the government of the .e"ub!ic

of South Africa and it re!ies on government guarantees and bai! outs6 )here is

!eadershi" crisis at SAA5 with the troub!ed nationa! f!ag carrier having been run by 7

different $EOs for the "ast 8 years6 In the !ight of the cha!!enges facing the air!ine5 a

strategic direction wi!! be "rovided for the air!ine as a bai!out so!ution6 It is

antici"ated that the recommended strategies wi!! bring stabi!ity to the air!ine whi!e at

the same time creating a favourab!e environment for it to return to a "rofit making

traectory.

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Introduction

In the current turbu!ent business environment5 where business earnings and margins

are not !ucrative5 organisations need to find innovative ways to com"!ement their

revenue growth ,%in +eek5 9:;-6 /e argues that a!though SAA o"erates

in a ?high!y com"etitive@ g!oba! environment it remains Africa*s


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intercontinenta! routes6 SAA*s "rimary business inc!udes "rovision of "assenger

air!ine and cargo trans"ort services6 SAA has subsidiaries name!y SAA technica!5

Mango 0 a !ow cost carrier and Air $hefs6

SAA is a member of the Star A!!iance5 the !argest Internationa! air!ine network6

In terms of awards5 SAA has been getting ?Best Air!ine in Africa@ award in the

regiona! category for ;9 consecutive years and winner of ?Service Exce!!ence Africa@

for < years6

Vision: ?)o be a "rofitab!e African air!ine with g!oba! reach@ ,www6f!ysaa6com-6

SAA*s vision goes hand in hand with its mission of de!ivering sustainab!e "rofits and

growing the market share by offering wor!d c!ass service to customers6 SAA

continues to focus on its o"erations in Africa5 ex"anding where there are

o""ortunities6 On internationa! routes5 the focus is to ensure that the routes are

"rofitab!e and sustainab!e6

SAA*s vision has got a ga"6 It does not ref!ect short term or !ong term ambitions of

the organisation6 )here shou!d be some timeframes so that effort and some

commitment can be "ut in "!ace in order to achieve this vision6

Mission: ?)o de!iver commercia!!y sustainab!e wor!d c!ass air "assenger and

aviation services in South Africa5 the African continent and to our tourism and trading

"artner@ ,www6f!ysaa6com-6

)here is a corre!ation between the vision and the mission6 A combination of these 9

gives SAA a strategic direction6

Long O!ectives

• )o su""ort South Africa*s nationa! deve!o"menta! agenda

• )o achieve and maintain commercia! sustainabi!ity

• )o "rovide exce!!ent customer service

• )o achieve consistent 5efficient and effective o"erations

• )o foster "erformance exce!!ence

Va"ues

$ustomer focused

8

http://www.flysaa.com/http://www.flysaa.com/http://www.flysaa.com/http://www.flysaa.com/


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According to SAA ,9:;-5 SAA antici"ates and strives to understand the

uniue needs of their customers through ?tai!oring@ customer s"ecific

so!utions6

Integrity

)hey strive to "ractise high standards of ethica! behaviour in a!! !ines of

work and maintaining credibi!ity by making certain that actions are

consistent ,SAA5 9:;-6

Accountabi!ity)aking res"onsibi!ity of individua! and team actions5 decisions and resu!ts

by estab!ishing c!ear "!ans and goa!s5 and measuring "rogress against

s"ecified goa!s is one of SAA*s key va!ues ,1'E5 9:;-6Safety

Safety is a key e!ement in the aviation industry6 SAA has ado"ted a Cerodefect morta!ity and it strives for Cero accidents through "ro"er training5

work "ractices5 risk management and adherence to safety regu!ations6

Situationa" ana"ysis

Industry descri#tion $trends

)he !and trans"ort infrastructure is di!a"idated in most African countries and this

creates a great o""ortunity for ?further deve!o"ment@ of air trans"ort servicesthroughout the continent ,A1B5 9:;;-6 )he deregu!ation of the air!ine has further

created more favourab!e conditions for air!ine o"erators6 Over the "ast < decades5

much of the wor!d has moved from a ?strict!y regu!ated air trans"ort@ to a more

!ibera!ised one ,A1B5 9:;;-6 In addition to that5 $ivi! Aviation in Africa has a!so

embarked on the "rocess of deregu!ation and this wi!! invo!ve gradua! !ibera!isation of

schedu!ed and non&schedu!ed inter&African air services5 abo!ishing !imits on the

ca"acity and freuency of Internationa! air services5 !ibera!ising fares and grantingtraffic rights to air!ine o"erators ,A1B5 9:;;-6 )his who!e "rocess wi!! create a

favourab!e environment for the current and emerging air!ine o"erators6

)he Aviation industry environment is high!y com"etitive des"ite a re!ative!y sma!!

market ,235 9:;


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/e further argues that o"eration in the air!ine industry wi!! soon become chea"er but

not sustainab!e ,B1Live5 9:;-6 )he high fue! costs cou"!ed with the weakening rand against do!!ar

erode route "rofitabi!ity6 According to 1'E ,9:;-5 et fue! is the biggest cost to SAA

contributing a""roximate!y


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dee"er crisis than "eo"!e rea!ise ,B1Live5 9:;:F

of gross income6 )his dis"arity when measured against internationa! com"etitors

"!aces SAA*s business in a cha!!enging com"etitive "osition ,SAA5 9:;8-6

Ageing f"eet

)he ?geogra"hica! "eri"hery@ has created "rob!ems for SAA on its !ong distance

internationa! routes and this is because SAA has got an ?ageing f!eet@ and these

aircrafts are fue! inefficient6 ,Mc1ona!d5 9:;>-6 )he ageing f!eet is uneconomica! in

terms of fue! consum"tion and has often breakdowns6 In addition to that5 these

"!anes are freuent!y ?"ay!oad@ restricted6 Moreover5 SAA*s !oad factors for

internationa! f!ights are "oor and this further erodes its financia! "osition6 )his "oses

a !ot of cha!!enges on SAA in terms of revenue generation6 .educed revenue inf!ow

resu!ts in negative financia! "erformance for SAA6

Leadershi# cha""enges

According to the Mai! and 4uardian ,9:;8-5 SAA Board members resigned in

Se"tember 9:;96 %o!!owing that5 1irectors did uit in October 9:;>6 In 1ecember

9:;>5 the res"onsibi!ity of the troub!ed air!ine was transferred from the Minister of

'ub!ic enter"rises to )reasury6 Subseuent!y5 in Dovember SAA sus"ended a cou"!e

of other executives ,Mai! and 4uardian5 9:;8-6 )his was fo!!owed by resignation by

the organisation*s $hief %inancia! Officer6 )his is a ref!ection that there is a

!eadershi" crisis within SAA6 Such a situation brings instabi!ity to the organisation

and it is very difficu!t to achieve sustainab!e organisationa! "erformance under thesecircumstances6 )his !eadershi" crisis has negative!y im"acted on the overa!!

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"erformance of the organisation es"ecia!!y given that SAA is on a !oss making s"ree6

MarketLine ,9:;8-5 argues that the recurring ?regime changes@ at SAA has destroyed

management focus on costs and "roductivity6 $oo"eration and commitment in terms

of setting u" "ro"er governance structure is crucia! to addressing !eadershi" issues

at SAA6 According to B1Live ,9:;


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dioxide and carbon monoxide5 and these gases contribute to the de"!etion of the

oCone !ayer resu!ting c!imate change $arbon tax charges have been increased by

most governments and this im"acts negative!y on "rofits of the air!ines as the

charges "ush the o"erating costs high6

O!der "!anes with high emissions have been affected by the new regu!ations6

O"erators running these "!anes have been huge!y affected since the "!anes have

been restricted6 In addition to that5 emission "ena!ties im"osed are too ridicu!ous

and this negative!y affects the finances of air!ine industry "!ayers6

In addition to the above factors5 natura! disasters such as earthuakes5 heat waves

and vo!canoes "ose a !ot of cha!!enges for the air!ine industry6

Lega" factors

SAA needs to "ay carbon taxes and adhere to hea!th and safety standards6 In

addition to that5 it has to remit tax to the South African revenue authority6 A!! these

factors are associated with costs and this has got a negative im"act on SAA*s

financia! "osition6

SAA*s com#etitors

SAA is current!y facing domestic com"etition from !ow cost air!ines and these inc!ude

Gu!u!a6com and %!ySa%air6 It has to res"ond in order to remain com"etitive and

maintain its market share6 Low cost air!ines have got new!y minted "rofessiona!s

,/ough et a!5 9:;;-6 In additiona! to that5 they offer their staff !ucrative sa!ary

"ackages to kee" them motivated6 $om"etition from these !ow cost air!ines has got a

negative im"act on SAA*s revenues since these budget air!ines offer !ower fares

which attract customers6

%!ySa%air is eroding SAA*s market share6 %!ySa%air com"etitive move has been bui!t

around !ow costs6 $ustomers "ay additiona! money on baggage5 seat se!ection and

mea!s6 )his kind of f!exibi!ity creates a favourab!e environment for customers6

%!ySa%air*s com"etitive "osition is a threat to South African Airways6 According to

/ough et a! ,9:;;-5 !ow cost com"etitions are dangerous in the sense that they

?redefine the entire com"etitive !andsca"e@6 In addition to that5 they ?transform its

va!ue chain to reduce "rices drastica!!y@6

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%om#etitive ana"ysis: (orter*s five forces

Source: +ough et a" ,-.//01

Bargaining #ower of uyers

)he air!ine industry is divided into distinct segments name!y business5 !eisure and

"ersona! trave!!ers6 $ustomers have a bargaining "ower es"ecia!!y given increased

variety of air!ines avai!ab!e6 In the !ight of this "!ethora of o"tions5 customers can

decide to go for !ow fare air!ines5 uick service or ua!ity service air!ines6 )his

situation "uts air!ines under "ressure to offer va!ue for money to their "otentia!

customers and this means offering best service at a !ow cost6 SAA needs to offer

best service at !ow cost if they are to win customers6

Bargaining #ower of su##"iers

SAA im"orts et fue! since !oca! su""!iers are ex"ensive and this means that it has no

contro! over the su""!ies as we!! as the "rice6 In addition to that5 the exchange rate

which is unstab!e worsens the situation6 It is difficu!t to get a stab!e "rice offer on the

et fue! and su""!iers tend to use this !oo" ho!e to ri" off buyers

In terms of aircraft su""!y5 there are 9 main su""!iers of aero"!anes name!y Boeing

and Airbus5 and these su""!iers have a high bargaining "ower over SAA due to

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!imited su""!iers of aircrafts6 In addition to that5 air!ines cannot easi!y switch su""!iers

and in most cases air!ines have !ong time contracts with their su""!ies6

Em"!oyees as su""!iers of human resources make use of co!!ective bargaining

"ower through trade unions to increase their bargaining "ower6 )his "uts SAA under

"ressure to "ay high sa!aries which are not ustifiab!e 0 there is !itt!e room for

negotiations6 )his co!!ective bargaining "ower "uts SAA under financia! stress due to

increased staff costs6

2iva"ry due to existing com#etitors

According to )arry ,9::J-5 during the years of regu!ation5 the extent of com"etition

within the air!ine industry was !arge!y based on non&"rice differentiation such as

customer service differentiation5 in&f!ight mea!s and in&f!ight entertainment6 After the

deregu!ation5 the market com"etition forced air!ines to come u" with a more efficient

way of using their f!eets to ?com"ete for customers@ on the basis of ?!ow cost@5

?attractive service@ and convenience ,)arry5 9::J-6 )his com"etition has shaken the

industry resu!ting in freuent "rice changes and variation of "rices de"ending on

time of "urchase of ticket and c!ass of service6 SAA is facing com"etition from !ow

cost air!ines such as Gu!u!a6com and %!ySa%air6 )his com"etition from !ow cost

air!ines "uts SAA under "ressure to res"ond and offer com"etitive "rices whi!e at the

same time "roviding best service6

)hreat of sustitute services

.oad5 rai! and ocean trans"ort industries offer substitute services which are a threat

to SAA cargo and the entire air!ine industry6 )he im"act of these substitute service

a""!y most!y to goods shi"ment5 since it is chea"er to use rai! or ocean trans"ort in

goods shi"ment6 /owever in cases where customers are more concerned about

uick service the im"act is re!ative!y !ow6 Dowadays convenience5 s"eed and safety

are now key e!ements to customers6 In addition to that5 the fact that the road network

in Africa is dere!ict5 this offers a great o""ortunity for the aviation industry6

)hreats of new entrants

)his as"ect is a !ow threat to SAA and the entire air!ine industry6 )he industry

reuires huge ca"ita! investment and without a strong customer base it is difficu!t to

thrive in the industry6 Dew entrants are vu!nerab!e and their chances of them makingsubstantia! "rofits are s!im6 In addition to that5 !ow switching costs between brands

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make it "ossib!e for customers to go for we!!&known brands and !eaving new entrants

at risk6 )his scenario offers SAA a better com"etitive edge over new entrants6

3ey success factors

According to /ough et a! ,9:;;-5 key success factors affect the abi!ity of an

organisation to "ros"er in the market "!ace6 )he fo!!owing success factors are

instrumenta! in ensuring that SAA remains com"etitive in the air!ine industry6 In

addition to that5 they create a favourab!e environment for SAA to grow its revenue

and become sustainab!e6

• $om"etent staff with aviation ex"erience

• )a!ented workforce

• Ski!!ed human ca"ita!

• Kuick service

• Exce!!ent customer service

• Extensive o"erationa! network

• A""ro"riate organisationa! structure

• Successfu! freuent f!yer !oya!ty "rogramme

• $ohesive turnaround as"iration

• Attitude change

• Su""ort from )reasury

•Su""ort from the 1e"artment of 'ub!ic Enter"rises

S4O) ana"ysis

As "art of situationa! ana!ysis5 a review of the organisation was undertaken6 )his

invo!ved identifying the strengths and weaknesses as we!! as "otentia! o""ortunities

and threats that have an im"act on the business "erformance6

Strengths

• SAA contributes to the country*s

41'• Strong safety "rogrammes an

4eakness

• Labour strikes and issues

• Leadershi" cha!!enges

• 'oor management resu!ting in

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SAA has got strong a!!iance with various internationa! air!ines6 $urrent!y SAA has got

codes share agreements with 97 air!ines across the wor!d6 )his strong a!!iance

enab!es SAA to offer increased f!ight freuencies and "rovide new standards of

convenience and customer service5 thereby earning it a com"etitive advantage over

its riva!s6

d0 %ontriution to the 56(

SAA contributes about :6< F of South Africa*s 41' which is a""roximate!y A.;95 >

Bi!!ion ,MarketLine5 9:;


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SAA has got fue! inefficient aircrafts and this !eads to high fue! costs6 As mentioned

ear!ier on5 fue! costs account for a""roximate!y


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)hreats

a0 8eno#hoic attacks and terrorism

Safety and security are key e!ements customers consider when trave!!ing6 )he

recent xeno"hobic attacks and aircraft hiacking are a threat to SAA6 )hey attacks

have reduced the number of "eo"!e trave!!ing and this has resu!ted in reduced

revenue6

0 Outreaks of e#idemics

Outbreaks of e"idemics such as Ebo!a !imit movement of "eo"!e and this negative!y

affect SAA*s core business as "assenger traffic is reduced6

Strategy ana"ysis: (otentia" strategies

)here are !imit!ess variations in the com"etitive strategies that organisations em"!oy

and this is because com"anies have different strategic a""roaches which suit their

own circumstances and industry environment ,/ough et a!5 9:;;-6 In addition to that5

com"anies have ?custom 0tai!ored@ strategies and this makes it difficu!t for other

com"anies in the same industry to em"!oy such strategies ,/ough et a!5 9:;;-6 In

trying to craft a strategy5 managers need to know whether their market target is

broad or narrow6 Moreover5 they need to check whether their com"etitive advantage

is !inked to !ow cost or "roduct differentiation6

a0 Low cost #rovider strategy

)his strategy focuses on striving to achieve !ower overa!! costs than riva!s6 A !ow cost"rovider has to be a""ea!ing to a ?broad s"ectrum of customers@ and this is usua!!y

achieved by under&"ricing riva!s ,/ough et a!5 9:;;(;>=-6

0 Broad differentiation

)his strategy seeks to differentiate the com"any*s "roduct offering from the riva!s* in

such a way that a""ea!s to a broad s"ectrum of buyers ,/ough et a!5 9:;;(;>=-6

c0 &ocused ,market niche0 strategy ased on "ow costs

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)he strategy focuses on making sure that the organisation concentrates on a narrow

buyer segment and outsmarting riva!s by having !ower costs than riva!s and hence

the abi!ity to serve niche members at a !ower "rice ,/ough et a!59:;;(;>=-6

d0 Best cost #rovider strategy

4iving customers more va!ue for money by incor"orating we!! to exce!!ent "roduct

attributes at a !ower cost than riva!s is the main focus of the best cost "rovider

strategy ,/ough et a!5 9:;;(;>=-6 )he who!e idea is to have the !owest costs and

"rices com"ared to riva! offering "roducts with com"arab!e attributes6

e0 &ocused ,market niche0 strategy ased on differentiation

)he strategy ensures that an organisation concentrates on a narrow buyer segment

and outcom"eting riva!s by offering niche members customised attributes that meet

their tastes and reuirements better than their riva!s* "roducts ,/ough et a!5

9:;;(;>=-6

Eva"uation of #otentia" strategies and recommendations

Low cost #rovider strategy$urrent!y SAA is making use of the "ow cost #rovider strategy on its subsidiary !ow

cost air!ine Mango6 Mango offers significant!y !ower costs than its riva!s SA ex"ress5

Gu!u!a6com and %!ySa%air whi!e at the same time making sure essentia! service

features are not com"romised6 In addition to that5 Mango use !ower cost base to

under"rice its riva!s and attract ?cost sensitive@ buyers6 )hrough this strategy

a""!ication5 Mango is ab!e to maintain its "resent "rice and market share which is

crucia! for its sustainabi!ity6 $a"turing a!! "ossib!e economies of sca!e5 o"erating

faci!ities at fu!! ca"acity and "ursuing efforts boost sa!es vo!umes is the core focus of

SAA*s !ow cost carrier6 According to SAA ,9:;8-5 Mango is doing we!! in terms of

"rofit making with a ;:F growth in "rofit in 9:;>6

4iven that this SAA*s !ow cost carrier is servicing the domestic routes and it is "rofit

making5 it is therefore recommended that SAA continues to a""!y !ow cost service

"rovider on Mango o"erations6 $ontinued a""!ication !ow cost !eadershi" increases

"otentia! for the organisation to increase its market share as we!! as "rofitabi!ity6Moreover5 increased "rofitabi!ity resu!t in the accumu!ation of ca"ita! reserves which

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can be used to "ursue other strategic a!ternatives such as investing in strategic

marketing6 )o increase revenue inf!ow5 it is recommended that Mango ex"and its

domestic o"erationa! network and offer services to routes that do not have budget

air!ines for exam"!e 3ohannesburg to East London route5 3ohannesburg to Mthatha5

and 1urban East London6

/owever5 there is a risk associated with continued a""!ication of !ow cost "rovider

strategy and imitation is one of the risks6 SAA*s !ow cost carrier is current!y facing

intense "ressure for the new entrant5 %!ySa%air and there is a "ossibi!ity that

Mango*s market share can be eroded6 %!ySa%air has to some extent imitated the

Mango mode!6 It is there for recommended that Mango monitors its business mode!

so that it does not on!y focus on cutting costs but a!so res"ond to the dynamism of the business environment6

&ocused ,market niche0 strategy ased on differentiation

SAA is current!y using the focused strategy based on differentiation through their

business c!ass service6 )he business c!ass offers a uniue service to customers and

this inc!udes entertainment5 !uxury seats5 best customer service and ex"ensive

mea!s and beverages6 )hese services are considered uniue and there is a niche

market "re"ared to "ay a "remium in exchange for these uniue services6 )his kind

of differentiation !eads to brand !oya!ty and customer retention5 and this shie!d SAA

from com"etitive riva!ry in the industry6 In addition that5 customer retention resu!ts in

increased revenue inf!ow6

/owever5 there is a maor risk associated with this differentiation strategy6 Investing

too much in differentiation is risky es"ecia!!y given that customers may end u"

sacrificing some of the uniue features if the "remium becomes too high6 4iven the

current economic situation in South Africa5 a few customers are "re"ared to go for

the business c!ass6 $ustomers are now cost sensitive and every rand saving counts6

)his has created a cha!!enge for SAA as few customers "ay for the business c!ass

and this has resu!ted in reduced revenue inf!ow5 and hence continued !osses6 SAA*s

business c!ass service offering re!ies on senior government officia!s who trave! on

business tri"s and with the recent!y announced austerity measures by 'ravin

4ordhan5 SAA might find itse!f in a more financia! stress as a resu!t of these

changes6

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In the !ight of the above ana!ysis it is therefore not recommended for SAA to

continue to a""!ying focused strategy based differentiation as this wi!! continue to

hammer the organisation in terms of "rofit making6

Best cost #rovider strategySAA makes use of this strategy on its internationa! routes6 )he main focus is around

giving customers re!ative!y va!ue for money and this invo!ves "roviding the best

service at a re!ative!y !ow cost6 SAA has managed to "rovide attractive and wor!d

c!ass service at a !ower cost than its riva!s on a!! !ong 0hau! internationa! f!ights6

SAA*s com"etitive advantage is based on !ower cost than riva!s and this is !ow cost

cou"!ed with u"market attributes meant to attract customers6 A!though SAA is

"roviding wor!d c!ass service to internationa! trave!!ers5 these internationa! routeshave huge!y im"acted on SAA*s financia! "osition6 According SAA ,9:;8-5 most

SAA*s !ong 0hau! internationa! routes are !oss making6 )his !oss is "art!y due to

ageing "!anes which are fue! inefficient6 /igh fue! costs a!so "!ay a ro!e in this !oss

making s"ree6 In addition to that5 the weakening rand has further increased SAA*s

financia! b!eeding6 +ith few tourists* movement5 SAA has suffered a big b!ow from

internationa! o"erations6

In the !ight of the above ana!ysis it not recommended that SAA continues a""!ying

best cost "rovider on internationa! routes since it is c!ear that the routes are not

"rofitab!e6 'artnershi" with other air!ine industry "!ayers in these internationa! routes

might work we!!5 ust to share the costs and reduce !osses6 'romotion of tourism and

!oosening immigration regu!ations might create a favourab!e environment for "eo"!e

to trave! and hence "romoting the air!ine business6

/owever5 it is recommended that SAA a""!y this strategy on its domestic f!ights as

com"etition intensifies6 In order to be com"etitive and gain a bigger market share5

SAA needs to "rovide va!ue for money services6 By so doing5 it wi!! attract more

customers and increase its revenue inf!ows5 and hence "rofitabi!ity and sustainabi!ity6

Broad differentiation

An introduction of Mango by SAA has created some diversity and this has addressed

"eo"!e*s different "references and tastes6 SAA offers a combination of business and

economy o"tions to trave!!ers and this f!exibi!ity creates a broad differentiation

resu!ting in increased number of customers6 /owever in trying to differentiate

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"roducts5 organisations end u" investing a !ot of money in the "rocess and this

erodes "rofitabi!ity6 In addition to that5 it is difficu!t to understand customers*

behaviour and trends6 As much as this strategy is working for SAA5 a""!ication of this

strategy is not recommended as it is a tria! and error method which is

unsustainab!e6

&ocused ,market niche0 strategy ased on "ow costs

$urrent!y SAA is not using this strategy6 )he strategy aims at securing com"etitive

advantage by servicing buyers in target markets at a !ower cost6 )he strategy is

a!most simi!ar to !ow&cost !eadershi" but the difference is in terms of the siCe of the

buyer grou" which can be based on geogra"hica! uniueness6 A""!ication of this

strategy is not recommended since com"etition is intense and finding a uniue buyer

grou" may be cha!!enging6

2ecommendations: Strategic direction

• An a""!ication of a "ow cost "eadershi# strategy6 SAA need to make sure that it

introduces more !ow cost air!ines on the domestic market6 )his means that they

wi!! offer !ow "rice with no fri!!s6 )he !ow "rice wi!! attract high number of

"assenger traffic resu!ting in increased revenue inf!ow for the air!ine6 In addition

to that5 this strategy wi!! increase SAA*s com"etitiveness and "rofitabi!ity6• A""!ication of a est cost #rovider 6 Dowadays customers want va!ue for money6

SAA need to find innovative ways that can ensure that they "rovide best service

at a !ow cost6 )his wi!! invo!ve cutting costs and increasing efficiency6 )his

strategy has worked we!! for South +est Air!ines and Easy 3et6 %ast turnaround

a""roach for exam"!e > to J shifts dai!y on domestic routes may bring "rofitabi!ityinstead of focusing on !oss making internationa! routes6)his hybrid of !ow cost !eadershi" and best cost "rovider is critica! reviving the

troub!ed air!ine6

(runing margina" #roducts and services

As "rice com"etition stiffens and "rofit margins get sueeCed5 having many

services might increase o"erating costs6 'runing service offering create a

"!atform for cost saving whi!e at the same time a!!owing for concentrating on

routes whose "rofit margins are highest6 In other words broad differentiation

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strategy won*t work as "rice com"etition intensifies6 SAA needs to "rune its !oss

making !ong 0hau! internationa! routes and focus on "rofit making domestic and

regiona! routes and by so doing they concentrate on where they have a

com"etitive advantage6

Im#roving va"ue chain efficiency

.einventing the industry*s va!ue chain might work we!! for SAA6 )hey need to

!ower costs whi!e at the same time "roviding the best service6 )his invo!ves

im"roving !abour efficiency for exam"!e se!f 0service check 0in6 In addition to

that5 SAA can use home&based sa!es re"resentatives to reduce overhead costs6)rimming costs

Stiffening "rice com"etition gives com"anies extra incentives to drive costs down

according to /ough et a! ,9:;;-6 SAA need to embark on a drive where they

negotiate better "rices with their su""!iers whi!e at the same time im"!ementing

tighter su""!y chain management "ractices6 )his wi!! resu!t is reduced

ex"enditure and hence increased net "rofit65"oa" strategy

Ex"anding internationa!!y into markets that are not saturated is an a!ternative

a""roach for SAA to reduce its financia! stress6 According to /ough et a! ,9:;;-5

ex"anding to foreign markets where attractive growth "otentia! sti!! exists and

com"etitive "ressures are not so strong is crucia!6 SAA can give it try in $hina5

Argentina and India6Outsourcing

SAA needs to outsource some of their su""ort services to other service

"roviders6 According to /ough et a! ,9:;;-5 managers s"end a !ot time5 energy

and resources focusing on su""ort activities instead of focusing on core "rimary

activities of the business6 Outsourcing administration activities might work out

chea"er than doing it interna!!y6 Some of the advantages of outsourcing inc!ude

increased res"onse time to changing environment and reduced overhead costs6

• (rivate #artnershi# through bringing a "rivate euity "artner can address some

of the financia! cha!!enges affecting SAA6• As a short term strategy5 im"roving efficiency in o"erations by restructuring the

o"erations through stream!ining and focusing on routes which are com"etitive

and "rofitab!e6 A""arent!y SAA is making huge !osses on !ong&hau! internationa!

routes and by minimising these routes its financia! stress can be reduced6

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Marketing #"an

&re9uent f"yer #rogram

%reuent f!yer "rogram attracts customers and this resu!t in increased revenue6 It is

recommended that SAA introduce a freuent f!yer !oya!ty "rogramme on their !ow

cost carrier5 Mango6 )his wi!! give them a better com"etitive advantage over their

riva!s6

)ourism

%ocus on tourism is crucia! to SAA since there is direct corre!ation between the

tourism industry and the air!ine industry6 SAA has to be a market !eader and !ink !oca!

tourism with the wor!d6 %inding a strategic "artner in the tourism and hos"ita!ity

industry wi!! go a !ong way in finding so!utions to financia! cha!!enges facing the

nationa! f!ag carrier6 A combined marketing strategy that ta!ks to both the air!ine and

the tourism industries is essentia!6

Increasing sa"es

Increasing sa!es to "resent customers can boost revenue inf!ow6 In a mature

market such as the air!ine industry5 growth through grabbing customers away

from riva!s is difficu!t according to /ough et a! ,9:;;-6 It is therefore

recommended that SAA ex"and sa!es to existing customers and this invo!ves

sa!es "romotions and "rovision of ?anci!!ary services@6• 2se of trave" agents minimises overhead costs6 )he fact that the agents get

commission means that they wi!! work hard to find customers6• 2se of socia" networks can "romote the brand

• Moi"e a##s brings convenience to customers

• Big data& SAA can reach "otentia! customers through data mining• Inf"ight entertainment needs to be u"graded and this wi!! go a !ong way in

"roviding exce!!ent customer service

+uman resources #"an

+uman resources deve"o#ment

)hrough a""!ication of human resources deve!o"ment as a strategic "artner5 SAA

can be in a "osition to achieve its strategic obectives and im"rove its "rofitabi!ity and

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In summary5 the who!e idea about having a c!ear!y defined human resources "!an

that ta!ks to the organisation strategy is to increase "roductivity5 retain staff and

foster innovation for the benefit of the organisation6

%onc"usion

4iven the current ever changing business environment5 com"etitive strategies are

needed for the success of businesses6 Embracing innovation and techno!ogy is

crucia! in today*s business6 /uman resource deve!o"ment is crucia! in achieving

!ong term business obectives in the air!ine industry6

Bi"iogra#hy

A1B69:;;6 Civil Aviation Industry ( imbabwe .e"ort

African 1eve!o"ment Bank 69:;;6 Civil Aviation Industry ( imbabwe .e"ort

B1Live69:;


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Documents

Strategic Management Project-Brighton