Assignment

On

Strategy Formulation of Biman Bangladesh Airlines Ltd.

SIM: 501 (Fundamentals of Strategic Management)

Submitted to:Dr. M A Mannan

Professor

Submitted by:Md. Shahidul Islam

ID: 210

MBA, 13th Batch

Stream: SIM

Department of Management Studies

University of Dhaka

April 12, 2012

Table of Contents

Particulars Page No.

SWOT Analysis: An Introduction 3

SWOT Analysis Workshop 4

Work Plan 4

Industry & Organizational Profile 4-8

International Airlines Industry 8

Bangladesh Airlines Industry 8

Elements of Internal and External Environment 9

List of Internal Strengths & Weaknesses 9

List of Opportunities & Threats 10

SWOT Format 11

Strategy Formulation 12

References 14

SWOT Analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weakness,

Opportunities, and Threats involved in a business. It involves specifying the objective of the

2

business venture or project and identifying the internal and external factors that are favorable

and unfavorable to achieve that objective. Identification of SWOTs is essential because

subsequent steps in the process of planning for achievement of the selected objective may be

derived from the SWOTs.

Strengths: characteristics of the business, or project team that give it an

advantage over others

Weaknesses: are characteristics that place the team at a disadvantage relative to

others

Opportunities: external chances to improve performance (e.g. make greater

profits) in the environment

Threats: external elements in the environment that could cause trouble for the

business or project

Conducting a SWOT analysis involves a seven steps process, which are illustrated in the

following chart:

SWOT Analysis Workshop

3

SWOT analysis of the Biman Bangladesh Airline Limited will be conducted following the

mentioned seven steps. The report is based on secondary data and it also contains

hypothetical information regarding the organization.

Work Plan

Corporate Profile of Biman Bangladesh Airlines limited

Biman Bangladesh Airlines is the flag carrier airline of Bangladesh. Its main hub is at

Shahjalal International Airport in Dhaka, and also operates flights from Shah

AmanatInternational Airport in Chittagong, earning revenue from the connecting service to

Osmani International Airport in Sylhet. Biman's operations are assigned the IATA airline

code BG and the ICAO airline code BBC, while its call sings is BANGLADESH. The carrier

provides international passenger and cargo service to Asia and Europe, as well as major

domestic routes. It has air service agreements with 42 countries, but flies to only 18.

The airline was wholly owned and managed by the government of Bangladesh until 23 July

2007, when it was transformed into the country's largest public limited company by the

4

Caretaker Government of Bangladesh. The airline's headquarters, BalakaBhaban, is located

in Kurmitola, Dhaka.

Created in February 1972, Biman enjoyed an internal monopoly in the Bangladesh aviation

industry until 1996. Presently Biman has two 737-800, four DC10-30, three A310-300 and

three F28-4000 aircraft in its fleet. Biman is in the process of procuring more new generation

aircraft such as Boeing 777-300ER, 787-8 and 737-800 for its fleet.

Biman operated flights to 29 international destinations as far away as New York City to the

west and Tokyo to the east. The airline has suffered heavy financial losses, and has a

reputation for poor service because of regular flight cancellations and delays caused by its

ageing fleet. Annual Hajj flights, transporting non-resident Bangladeshi workers and

migrants, and the activities of its subsidiaries, form an important part of the carrier's business.

Under Skytrax's five-star rating systems, Biman merits two stars. The carrier is currently

facing competition from local private airlines & some international carriers, which offer

greater reliability and service standards, which is experiencing an 8% annual growth rate,

owing to a large number of non-resident Bangladeshis.

Since becoming a public limited company, the airline has reduced staff and begun to

modernize its fleet. Biman has made a deal with Boeing for 10 new aircraft, along with

options for 10 more.

VISION

To establish Biman Bangladesh Airlines Limited in the aviation market as a

world-class airline.

MISSION

To provide safe, reliable, efficient and economical air transport services and to

satisfy customers’ expectations while earning sustainable profit and continuing to

be a caring employer.

The airline’s Reservation and Departure Control System and other communication systems

are fully computerized. Biman is now striving to make the airline more attractive to its valued

passengers by fixing priority on providing more comfort and maintaining schedule regularity.

Biman does entire maintenance work on its F-28 aircraft. Biman is also doing C-check, D-

check on DC10-30 and A310-300 in its hangar complex at Dhaka.

5

Checks, repair and maintenance of one DC10-30, one wide bodied Boeing and two F-28

aircraft can be done simultaneously there.Biman is in the process of procuring more new

generation aircraft such as Boeing 777-300ER, 787-8 and 737-800 for its fleet.

In addition to its own aircraft, Biman’s ground-handling unit also provides support to

Singapore Airlines, Thai Airways, Malaysia Airlines, Qatar Airways, Emirates, Kuwait

Airways, Oman Air, Saudia, Gulf Air, PIA, Indian Airlines, Dragon Air, Druk Air, etc.at

HazratShahjalal International Airport,Dhaka.

HUMAN RESOURCES AND ORGANIZATIONAL STRUCTURE

The human resource is of consists of the country’s most experienced and expert people

although the appointment in the top level management is highly politically influenced.

Therefore, the person who does not have proper experienced and expertise in the airline

business are appointed in the top. This is one of the major of the employee dissatisfaction and

airlines poor performance.

The Manpower status of Biman Bangladesh Airlines Ltd as of June 2010 is given below-

Employee Level Permanent Contractual Casual Total

MD & CEO -- 01 -- 01

Executive Director 03 03 -- 06

Cockpit Crew 132 14 -- 146

General manager & Equivalent 13 01 -- 14

Dy. General Manager &

Equivalent

30 01 -- 31

Manager/Asst. manager/officer &

Equivalent

701 25 -- 726

Staff 1945 336 -- 2281

Total 2824 381 -- 3205

ORGANOGRAM

6

Planning Administration

Finance Customer Service Planning

Engineering

Flight Operation Planning

Marketing & Sales Planning

Store & Purchase

Directors

Board of Directors

MD & CEO

Directorates

Chairman

GM

DGM

Manager

Asst. Manager

Officer

Assistant

Jun. Officer

Supervisor

M.L.S.S

The organization is extremely red taped and bureaucratic causing delayed and costly decision

making and inefficiency in operation.

FIXED ASSET LESS DEORECIATION

7

The asset of the airline is adequate in relevance of other local airlines. Moreover the

government always remains as the helping hand of the organization in crisis period as it the

sole national flag carrier. But proper transparency is not maintained in their regular operation

like maintenance and procurement of aircraft, which costs extra money of the airline.

Amounts in Tk.

2009-10 2008-09

Biman Bangladesh Airlines (BBA) 15,803,855,303 16,154,051,948

Biman Poultry Complex (BPC) 1,215,958,206 1,214,724,483

Biman Flight Catering Center (FCC) 192,239,779 195,892,076

Total 17,212,053,288 17,564,668,507

FLIGHT

Biman Bangladesh Airlines basically provides two categories of services:

Domestic flights: Currently Biman has the following domestic flights:

Sylhet

Chittagong

Cox’s bazaar

International Flights: Bangladesh Biman provides 51 departure and 51 arrival fights per

week. It has the following

International flights from Dhaka to:

Abu Dhabi Bahrain Hongkong Singapore Mumbai

Delhi Bangkok Dubai New York Frankfurt

Jeddah Calcutta Karachi Doha Kuwait

London Katmandu Kualalumpur Paris Tokyo

Riyadh Rome Brussels Muscat Yangoon

8

Element of Internal and External Environment

The elements of internal and external environment that most probably impact the

organizations’ performance and profitability are given in the following table:

Internal Environmental Elements External Environmental ElementsHuman ResourcesManagementPhysical & financial ResourcesTechnological ResourcesOrganizational culture

General environmental elementsEconomic EnvironmentPolitical EnvironmentDemographic EnvironmentSocio-cultural EnvironmentIndustry environmental elementsCompetitorsSubstitute product New entrants

List of internal Strength and Weakness

Based on the internal factors selected above, a list of internal Strengths and Weakness is

prepared below:

Strengths and Weakness Related Internal environmental elements

Strengths

Technological resources

Human ResourcesPhysical & financial resources

A. Biman is in the process of procuring more new generation aircraft such as Boeing 777-300ER, 787-8 and 737-800 for its fleet.

B. Experienced technical personnel

C. Adequate physical and financial resources

Weakness

Management

Human ResourcesManagement

Organizational culture

A. Politically influenced appointment of top level

management and top level personnel with improper

experience and expertise in airline business.

B. Lack of motivation among personnel

C. Lack of transparency in operation like maintenance

and procurement of aircraft.

D. Political influence and bureaucratic organization

9

List of External Opportunities and Threats

Based on the external general and industry factors selected earlier, a list of external

Opportunities and Threats is prepared below:

OPPORTUNITY AND THREAT Related External environmental

elementsOpportunities

Demographic environment

Socio-cultural environment

Competitors

Substitute product

General Environment Opportunities

A. Unexplored market in Middle East, East Asia, Asia pacific, Europe, America; where Biman does not have direct flight and potential domestic market.

B. Preference over airline than other means of transportation because of rise domestic economic activity and poor condition of other transportation system.

Industry Environment Opportunities

A. Exit of British airways from Dhaka to London direct route operation provide chance to gain the market share and less competition

B. Postponement of GMG Airlines has opened a way to capture more market share

C. Poor infrastructure and service of road and water transportation between city and major towns

ThreatsPolitical environment

Economic environment

Competitors

Economic features

Competitors

General Environment Threats

A. Volatile energy market frequently increasing the cost of fuel

B. Global economic recession affecting the frequency of travel

Industry Environment Threats

A. Emergence of new domestic airlines, i.e. Regent, Bestway, and their expansion in international routes.

B. Worldwide industry slow growth. During 2001 to 2006 the rate of air travel globally increased at 3.7 percent per year. Profitability is generally low, in the range of 2-3% net profit after interest and tax1.

C. Procurement of third generation energy efficient aircrafts by competitors.

1http://en.wikipedia.org/wiki/Airline

10

SWOT Format

The following table will illustrate the summary of the total SWOT analysis:

Serial no

Statements Symbols

Internal environment Strengths Weaknesses1 Biman is in the process of procuring more new

generation aircraft such as Boeing 777-300ER, 787-8 and 737-800 for its fleet.

2 Experienced technical personnel3 Adequate physical and financial resources4 Politically influenced appointment of top level

management and top level personnel with improper experience and expertise in airline business.

5 Lack of transparency in operation like maintenance and procurement of aircraft.

6 Lack of motivation among personnel7 Political influence and bureaucratic organization

External environmentIndustry environment Opportunities Threats

8 Exit of British airways from Bangladesh operation provide chance to gain the market share and less competition

9 Poor infrastructure and service of road and water transportation between city and major towns

10 Emergence of new domestic airlines, i.e. Regent, Bestway. And their expansion in international routes.

11 Worldwide industry slow growth. During 2001 to 2006 the rate of air travel globally increased at 3.7 percent per year. Profitability is generally low, in the range of 2-3% net profit after interest and tax2.

12 Procurement of third generation energy efficient aircrafts by competitors.

General environment Opportunities Threats13 Unexplored market in middle east, east Asia, Asia

pacific, Europe, America; where Biman does not have direct flight and potential domestic market.

14 Preference over airline than other means of transportation because of rise domestic economic activity and poor condition of other transportation system.

15 Volatile energy market frequently increasing the cost of fuel

16 Global economic recession affecting the frequency of travel

2http://en.wikipedia.org/wiki/Airline

11

Strategy Formulation:

Objective Setting:

To increase 10% Middle East and South Asian market share within 2014.

Adopted Strategy:

Biman shall use niche marketing strategy. To achieve the objective it has to ensure the

following actions plan. These are-

Its main target customer shall be blue collar migrant Bangladeshi workers and middle

class economical businessmen

Ensuring on time take off service to the passengers

Recruitment of new innovative business graduates in vital positions in place of back

dated employers

It shall add some middle class fuel-efficient third generation aircrafts that can carry

200-250 passengers at a time.

Using of latest airlines MIS system to facilitate the service and reduce the number of

unnecessary employees.

Providing best service from competitors with reasonable fare.

Offering attractive incentives to the local and international travel & tour agencies

Rebuilding a positive brand image to the passenger through offensive advertising

Re launching international flight services from Chittagong and Sylhet.

Improve flight schedule services; if any problem occurs it will inform the passengers

as soon as possible before the flight

Conclusion

12

Bangladesh Biman Airlines Limited as one of the oldest and the sole nationalized airliner in

Bangladesh is rewarded with both some strengths and weaknesses. As a nationalized

company it is highly bureaucratic and politically influenced which causes lack of

transparency in operations. On the other hand airlines long business period and government

support helps it to accumulate plenty of assets and the experience also helps it to build a pool

of expertise personnel. Poor national communication channel, exit of key market player,

potential unexplored market and business people’s preference over airline travel provide its

opportunities for future growth. Although emergences of local competitions, industry slow

growth, changing technology, volatile fuel market and world economic recession can become

threats for the airlines future growth. The airline must have to minimize its lacking in internal

weak factors and also properly maintain its strength to make them its competitive advantage.

Only then it will able to tackle the future challenges properly and grab the opportunities of

growth.

References

13

Md. Ashraf Hossain Khan, Accounts Officer (Head Office), Biman Bangladesh

Airlines Ltd.

Biman Bangladesh Airlines Limited, Annual Report, 2010.

http://www.biman-airlines.com

en.wikipedia.org/wiki/Biman_Bangladesh_Airlines

14