MANAGERIAL POLICY

PRESENTED BYGROUP “A”

1

First of all WE thankful to almighty Allah who has granted us power, knowledge, and expertise to be able to meet with any academic and social challenge. Then we highly indebted to course instructor Mr. ZUBAIR AHMED who has always been there to assist and support us to complete the assignment with much more ease than anticipated. Moreover, our parents prayers are potential sources to boost up our confidence in terms of achieving targets put forth to us by my teacher. last but not the least friends have cooperated and made me understand the patchy aspects of the assignment. For the above act of kindness on the part of everyone involved in the process we shall ever remain grateful to them.

Regards,

Imran A. Ansari

2

Table of Contents

1. Introduction………………………………………………………………… 32. EFE evaluation………………………………………………………………33. management…………………………………………………………………104. mission and vision ………………………………………………………… 115. evaluation of mission statement …………………………………………. ..126. proposed mission statement ……………………………………………….. 127. EFE ………………………………………………………………………. 138. IFE …………………………………………………………………………. 149. CPM ………………………………………………………………………... 1510. Porter’s 5 forces role at PIA ………………………………………………… 1611. SWOT analysis ……………………………………………………………. 1712. BCG matrix …………………………………………………………………. 1913. IE matrix …………………………………………………………………….. 2014. SPACE matrix ………………………………………………………………. 2115. QSPM matrix ……………………………………………………………….. 22

3

INTRODUCTION

Pakistan International Airlines Corporation is a Pakistan-based company that is principally engaged in the provision of air transport services. Other activities of the Company include provision of engineering and other allied services. The Company operates in two business segments: airlines operation and hotel operation. The airlines operation segment provides air transport and other allied services. Hotel operation segment provides accommodation and related services in Pakistan, United States and Europe. Its wholly owned subsidiaries include Sky rooms (Private) Limited and Midway House (Private) Limited. Pakistan International Airlines Corporation has a 99% interest in PIA Investments Limited.

EFE evaluation

PIA MOTO IS:PIA MOTO IS:

(GREAT PEOPLE TO FLY WITH).

1. PIA HEAD OFFICE IN

(OLD JINNAH TERMINAL KARACH).

2. FOUNDED OR ESTBLISHED IN 1955.

3. It is our homeland airline.

4

4. PIA was the first Asian airline to operate a jetliner when it leased the Boeing 707 from Pan am in 1960.passengercan be seen boarding the plane at London’s Heathrow airport.

5. PIA was the first Asian airline to touch down the Norway in 1999.

Skytrax (world air line rating program).

POLITICAL FACTORS

Political factors always have a great influence on the way businesses operate in the airline industry and the spending power of customers. In recent years it has been observed that government played an active role in increasing competition in the airline industry. A number of new airlines such as AirBlue and JS Air have been awarded licenses to enter the domestic market. Pakistan has achieved some political stability in recent years. If the management of PIA believes that the present government will perform well (consistently), then there will be more investment in the form of purchase of new airplanes and latest technology. The over all industry will grow resulting in more luxurious and comfortable flights. With the military takeover government policies have become more liberal.

ECONOMIC FACTORS Currently, Airlines industry has three major players: Pakistan International Airlines, an Air blue, Aero Asia and Shaheen Airlines. Their target market includes domestic travelers as well as Pakistanis living abroad particularly in the UK and USA. These countries have strong economies coupled with high purchasing power. Customers’ purchase behavior depends very much on prices of the competing airlines as well as services offered. As

inflation rate is unstable in Pakistan, spending power of consumers has effected in the long term. In fact growth in Pakistani economy has resulted in an increase in spending power and has positively impacted the airline industry. Economically, the new millennium has been highly volatile; the September 11 attacks revolutionized the whole world. Consequently, there was a global depression in the North America, South America, Australia and Europe. However, in Asia especially Pakistan the effect in the short term was otherwise. The economy began to boom because of greater remittances from abroad and whole sum immigration by expatriates. As a result, demand for air travel in South Asia rose. Economic conditions of Pakistan are however improving. PIA has cost a advantage over its competitors because of its newly acquired, improved, long distance aircrafts from Boeing’ which give longer range and better fuel economy than any other jet currently produced. This cost advantage is a barrier to entry for new firms. However, this cost advantage will not be significant on domestic routes.

5

SOCIAL FACTORS The social arid cultural influences on business vary from country to country. The social structure of Pakistan is closely tied. The trend is now changing as the general public is educated and is pursuing professional goals. Customers are more aware of market conditions and available options and want to get best value for their money. They spend considerable time and money on entertainment hence increasing the need of in-flight entertainment systems. Also, word of mouth has a significant impact in the use of airline services. Hajj attracts a huge number of customers. The social environment of Pakistan is turning liberal with the new regime. The initiative to automate check-in and ticket booking process might not be very popular with the general public (even educated population) is still technology averse. E-ticketing might also face significant challenges as consumers are generally reluctant to provide their credit cards information over the phone and the internet. The consumers, however, have a warm reaction to the prospect of less costly but quality service flights.

TECHNOLOGICAL FACTORS

Technology is vital for competitive advantage and is a major driver of the airlines industry. Major technological changes are taking place in the airlines industry with innovations in the reservations and booking systems. In-flight entertainment systems and auto check in counters are two examples of such innovations. Internet plays a key role in e-ticketing as consumer can easily reserve tickets or check the status of the flight. A key issue will be the extent, to which technological advancements (such as Internet) impact distribution and cost synergies from industry consolidation, can offset upward pressures on costs. PIA has always led the path of technological innovations by introducing new technologies ahead of its competitors such as its auto check-in counters which has helped it gain market share. It was the first airline in Pakistan to install Sabre system followed by the market leader.

SOCIAL RESPONSIBILITIES As a business leader, PIA is committed to making the better place. Leader about PIA’s contributions to the progress of Pakistan and its ongoing corporate social responsibilities program. Safety Management System at PIA

PIA is the first airline to get certified (initial certification) on Safety Management System (SMS) by Civil Aviation Authority CAA - Pakistan. CAA Air Navigation Order (ANO 91.0032 issued in September 2008) binds all airlines operating in Pakistan to have SMS. Well before the issuance of this ANO, PIA initiated SMS awareness and implementation in July 2008. PIA awarded initial certification on SMS in 27th February 2009 by CAA.

Part 2.Part 2.

6

1. Competitors: of P.I.A. is Shaheez air ways, Air blue.

2. Suppliers: Fuel supplier of PIA is Pakistan State oil (PSO), Shell oil Refinery Company and some time Dubai supply the oil to PIA.

3. DISTRIBUTORS: local travel agencies.

4. Creditors: State Bank of Pakistan, Pakistan State Oil (PSO).

5. CUSTOMERS; Business men, General people and Politician.

6. EMPLOYESS; HR persons, Finance persons, Marketing persons, Security persons and etc….

7. COMMUNICATIES: Telephone, E-mail, By post and etc…

8. MANGERS: Marketing, Finance, HR and others.

9. STOCKHOLDERS: Government Of Pakistan.

10. LABOR UNIONS: Are available in PIA like cabin crew, Public dealing staff and others.

11. GOVERRMENT: Involve Pakistani.

12. TRADE ASSOCIATION: Courier service like PIA has its own

courier service available “SpeedX”.

13. SPECIAL INTERESTED GROUP; Business men.

14. PRODUCTS: SPEEDX, Member ship card. Business class and economy calss and etc…

15. SERVICE: Pick and drop from airport to hotel.

16. MARKET: Domestic market is very strong and small international

market because, there are three times in a week flights is Pakistan to England and Pakistan to U.S.A. and non stop.

7

17. NATURAL ENVIROMENT: Pure drinking water, Plants are available in Pakistani Airports etc…

Self workSelf work..Competitive force:

1. Close competitor of PIA Air blue and Shaheez airways.

PIA has one advantage is that it has more domestic flight and direct flight Karachi to London and other is New York to Karachi 3 times in a week.

ENVIROMENT FORCE

8

1. So many people are travel in PIA because no any other

Alternative is available in Pakistan in domestic routes.

Domestic - 24 Destinations

International - 36 + 2 Destinations

9

MANAGEMENT

Strategic management

Systematic analysis of the factors associated with customers and competitors (the external environment) and the organization itself (the internal environment) to provide the basis for rethinking the current management practices. Its objective is to achieve better alignment of corporate policies and strategic priorities

Strategic management concepts are related mainly to the business sector. Although, a proper strategy is necessary to get success in every field of life, but this particular term is mainly coined for the corporate sector.

“PIA uses strategic management concept and techniques by not only targeting potential markets but deputing best officers to do the job of marketing/ sales and finance. PIA focuses on the strength of the competitors like “connect air”,

10

“equipment” and “fares” and matches then for the best results. Also it keeps an eye on the weaknesses of the competitors and avoids making mistakes committed by competitors. Likewise, opportunities of new markets or increasing market share in existing market are same of the examples. The potential threat in the terrorism, visa policy for Pakistan nationals, rising oil prices and aging fleet are being addressed at their best.”

Objectives: Mission, purpose, or standard that can be reasonably achieved within the expected timeframe and with the available resources. In general, an objective is broader in scope than a goal, and may comprise of several different goals. Objectives are the most basic planning tools underlying all planning and strategic activities. They serve as the basis for policy and performance appraisals, and act as glue that binds the entire organization together.

Goals :Establishing specific, measurable, attainable, realistic and time-targeted objectives. Work on the goal-setting theory suggests that it can serve as an effective tool for making progress by ensuring that participants have a clear awareness of what they must do to achieve or help achieve an objective. On a personal level, the process of setting goals allows people to specify and then work towards their own objectives — most commonly financial or career-based goals. Goal-setting comprises a major component of Personal development.

“Every year there are tow marketing conferences in which the goals are communicated and performance are evaluated. PIA tasks serious remedies where the performance of a station or SBK is not up to desired level.”

VISSION:PIA’s vision is to be a world class airline meeting customer expectations through excellent services, on-time performance, innovative products and absolute safety.

MISSION: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

11

EVALUATION OF MISSION STATEMENT

MISSION STATEMENT COMPONENTS

MISSION STATEMENT COMPONENTS

YES NO

CUSTOMERS YES

PRODUCT OR SERVICE YES

MARKETS YES

TECHNOLOGY YESCONCERNS FOR SURVIVAL,GROWTH,ANDPROFITABILITY

NO

PHILOSOPHY NO

SELF CONCEPT NO

CONCERN FOR PUBLIC IMAGE

YES

CONCERN FOR EMPLOYEES YES

As we analyze the mission statement of PIA we found some missing components.Like:Like: Philosophy, self concept and concern for survival growth profitability Philosophy, self concept and concern for survival growth profitability And we effort to add it.And we effort to add it.

PROPOSED:PROPOSED:

MISSION:

12

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• Providing value added services• Facilitate the Pakistani nation give them importance with care profitability. • Economical pricing fair treatment.

EFEKey External Factors

Opportunities Weight Rating Weighted Score

Having the maximum route and fleet

0.08 3 0.24

Customer data base 0.09 4 0.36Removal of international trade

barriers0.03 2 0.06

Shifting customer needs 0.12 3 0.36Industry Recovery 0.04 1 0.04

Arrival of new technologies 0.16 2 0.32Threats

Political involvement 0.08 3 0.24Accidents 0.06 2 0.12

Strong Competition 0.07 1 0.07Interest and foreign currency

exchange0.06 3 0.18

Decline in airline industry 0.06 3 0.18Increased trade barriers 0.08 2 0.16

Time fluctuation 0.07 4 0.28TOTAL 1.00 2.61

13

IFEINTERNAL FACTOR EVALUATION

Strength WEIGHT RATING WEIGHTED SCORE

Economical 0.12 3 0.36Large market share 0.10 2 0.20

Strong global presence 0.13 1 0.13

100% customer focus 0.12 2 0.24

Experienced Pilots 0.09 4 0.36

So many flights 0.08 1 0.08

Weaknesses

Old aero planes 0.09 3 0.27

Management Corruption 0.16 3 0.48Week services 0.11 2 0.22

Total 1.00 2.34

14

CPMCOMPETITIVE PROFILE METRIX

PIA AIR BLUE SHAHEEN AIRWAYS

Critical Success factor Weight Rating Score Rating Score Rating Score

AdvertisingService Quality

Price CompetitivenessManagement

FinancialCustomer LoyaltyGlobal Expansion

Market ShareE-commerce

Organizational Structure

0.050.170.150.050.110.100.200.050.090.03

1242114333

0.050.340.600.100.110.100.800.150.270.09

2433341242

0.100.680.450.150.330.400.200.100.360.06

2323231132

0.100.510.300.150.220.300.200.050.270.06

TOTAL 1.00 2.61 2.83 2.16

15

PORTERS FIVE FORCES MODELS

16

SWOT Analysis-Internal Factor

StrengthsStrengths High commitmentHigh commitment

Innovative ideasInnovative ideas

Strong financial backgroundStrong financial background

Service qualityService quality

Well organized and strong networkWell organized and strong network

Experienced Experienced

entrepreneurial teamsentrepreneurial teams

Empowered and dedicated employeesEmpowered and dedicated employees

WeaknessesWeaknesses Centralized powerCentralized power

Personal biasnessPersonal biasness

Lack of brand loyaltyLack of brand loyalty

Potential influencePotential influence

Communication gapCommunication gap

Opportunities

Market growth

Better economy

17

Consumer awareness

Potential in selected target market

Higher profit margin

Threats

Uncertain economy

High competition

Unrest in the city

Consumer unconsciousness

Future competition

Competitors promotional activities

SO Strategies:

For maintaining leading market position with more than 800 daily flight around 150,000 passengers monthly fly with 51.2% market share they must provide maximum route and fleet.

Create more superior operating system to create growing demand for low cost and creating customer loyalty.

Network present of PIA shifting need.

WO Strategies:

Creating supplier relationship development to provide at low cost services and creating customer loyalty

Fill communication gap between supplier, customers, and employees

Easy access to information and resolution.

PIA should make its different dept into SBU’s for market growth.

ST Strategies:18

Well organized service quality which helps in growth.

Innovative idea and effective use of technology.

PIA should provide high quality promotional activities

WT Strategies:

Over loaded staff, make team and go for diversification and give them projects.

Top down approach for two way communication.

Reduced overhead cost, it should managed its resources.

Save resources use in others.

BCG MATRIX:

19

• Boston consulting group has three type to evaluate company for instance evaluation of company by products/services vise, geographic vise and on the basis of competitors.

• On product wise PIA has major two services e.g. passenger, speedex –in

passenger services PIA is suffering and declared at DOG. While in speed-x ? although have government support

• According to financial report of PIA on geographic basis (domestic), CPM states that PIA is above average and have maximum flights domestically although it is facing ?-situation because of not utilizing government support

• IF we evaluate on the basis of competitors, PIA facing a lot of competition domestically and internationally and declared as dog.

IE Matrix

20

SPACE matrix Financial Strength (FS)

Price earning ratio = 1 Return on investment = 2

Cash flow = 2

21

=5 Environmental Stability (ES)

Rate of inflation =- 4 Competitive pressure = -3

=-7 Industry Strength (IS) Financial stability = 1 Productivity, capacity utilization = 2

=3 Competitive advantage (CA) Customer loyalty = -3 Product quality = -4 =-7

Financial Strength (FS) = 5 Environmental Stability (ES) = -7 Industry Strength (IS) = 3 Competitive advantage (CA) = -7

X-axis = CA + IS = -7 +3 = -4 Y-axis = FS + ES = 5 + -7 = -2

QSPM Matrix:• It lies on third stage in strategic analytical frame work.• It takes input from first stage and match with second stage and evaluate in third

stage.• It evaluates which alternative strategies are objectively best.

FS+6

+1

+5+4+3

+2

-6-5

-4-3

-2

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

IS

22

• It assigns weights between 0 to 1 in four areas opportunity,threat,strength,weaknesses

QSPM MATRIX (Quantitative Strategic Planning Matrix)

STRATEGICALTERNATIVES Further in Asia Renovate the Existing

strategyKey Factors weight AS TAS AS TASOpportunities PIA has potential market in middle east if PIA Upgrades its fleet.

0.19 1 0.19 2 0.38

PIA has largest domestic network and proper rout planning

0.12 2 0.24 1 0.12

PIA can generate huge amount of revenue through web.

0.10 3 0.30 2 0.20

Arrival of new technologies 0.10 3 0.30 1 0.30Threats Negative rising perception about the country regarding terrorism

0.20 1 0.20 3 0.60

Accidents 0.10 2 0.36 1 0.18 Fast growing domestic and international competitors

0.12 3 0.36 2 0.24

Politically instability and law order situation 0.07 1 0.07 4 0..28 Total 1.00Strength

PIA has status of being Flag carrier of pakistan

0.12 3 0.36 2 0.24

well established Brand 0.10 2 0.20 2 0.20 Electrical ticketing by web 0.13 1 0.13 2 0.26 Network Presence 0.12 2 0.24 1 0.12 Experienced Pilots 0.09 2 0.18 2 0.18 Having Govt: Protection 0.08 3 0.24 1 0.08Weaknesses

Old aging fleet causing high operating cost 0.09 1 0.09 2 0.18 Management Corruption 0.16 2 0.32 1 0.16 Lack of market activities as compare to competitors

0.11 1 0.11 2 0.22

Total 1.00 3.89 3.94

23

PIA-CORPORATION.RATIO ANALYSIS

RS IN THOUSAND

Note % 2008 % 2007 CHANGEREVENUE - net 27 100 99171686 100 78554483 26.57

COST OF SERVICES Aircraft fuel 46.237 45854358 38.591 30315159 7.646096Others 28 47.811 47414881 54.14 42529257 -6.32892

94.048 93269239 92.731 72844416 1.31718

GROSS PROFIT 5.9517 5902447 7.2689 5710067 -1.31718

Distribution costs 29 5.4346 5389632 5.6632 4448674 -0.22852Administrative expenses 30 5.9115 5862577 6.7388 5293654 -0.82729Other provisions & adjustment - net 31 1.5339 1521179 0.5515 433223 0.982391Exchange loss - net 24.32 24118823 0.9168 720151 23.40352

Other operating income 32 (0.76)

(757,963)

(0.78) (614,523) 0.017995

36.436 36134248 13.088 10281179 23.34809

LOSS FROM OPERATIONS 30.484 30231801 5.819 4571112 24.66527Finance costs 33 9.1024 9027003 10.106 7938364 -1.00315Share of loss/profit from subsidiary co. 0.0004 397

(0.03) (20,211) 0.026129

LOSS BEFORE TAXATION 39.587 39259201 15.899 12489265 23.68825

Taxation 34 (3.31)

(3,282,690) 0.9247 726390 -4.2348

NET LOSS FOR THE YEAR 36.277 35976511 16.824 13215655 19.45345LOSS PER SHARE 35 A class Ordinary shares of Rs.10 each 17.84 6.25 B class Ordinary shares of Rs.5 each 8.92 3.12

24

WORKING CAPITAL

WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES

2007 = 16419640 - 53849037 = - 37429397 2008 = 19126990 – 73779907 = - 54652917

CURRENT RATIO

CURRENT RATIO = CURRENT ASSETS/CURRENT LIABILITIES

2007 = 16419640/ 53849037 = 0.30:1 2008 = 19126990/ 73779907 = 0.26:1

QUICK RATIOQUICK RATIO = QUICK ASSETS/CURRENT LIABILITIES

2007 = 14833043/ 53849037 = 0.27:1 2008 = 13674475/ 73779907 = 0.18:1

DEBT RATIODEBT RATIO = TOTAL LIABILITIES/TOTAL ASSETS

2007 = 155083177/ 157144043 = 0.93:1 2008 = 202300314/ 185600955 = 1.09:1

EQUITY RATIOEQUITY RATIO = TOTAL SHARE HOLDER EQUITY/TOTAL ASSETS

2007 = 2060866/157144043 = 0.013:1 2008 = -16699359/185600955 = -0.09:1

DEBT-TO-EQUITY RATIODEBT TO EQUITY = TOTAL LIABILITES/TOTAL EQUITY

2007 = 155083177/ 2060866 = 75.25% 2008 = 202300314/ -16699359 = -12.11%

25

ASSETS TURNOVERASSETS TURNOVER = TOTAL NET SALES/TOTAL ASSETS *100

2007 = 78554483/157144043*100 = 49.98% 2008 = 99171686/185600955*100 = 53.4%

RATE OF RETURN ON TOTAL ASSETS

RATE OF RETURN ON TOTAL ASSETS = NET INCOME/TOTAL ASSETS*100

2007 = 13215655/ 157144043*100 = 8.40% (loss) 2008 = 35976511/ 185600955*100 = 19.38% (loss)

RATE OF COST OF GOODS SOLD

RATE OF COST OF GOODS SOLD = COST OF GOODS SOLD/TOTAL NET SALES*100 2007 = 72844416/ 78554483 *100 = 92.73% 2008 = 93269239/ 99171686*100 = 94.04%

RATE OF GROSS PROFIT

RATE OF GROSS PROFIT = GROSS PROFIT/TOTAL NET SALES*100

2007 = 5710067/ 78554483*100 = 7.27% 2008 = 5902447/ 99171686*100 = 5.95%

LOSS PER SHARE

EARNING PER SHARE = NET INCOME/NUMBER OF SHARES

2007 = 6.25 per share

26

2008 = 17.83 per share

DEBT TO ASSETS RATIO

DEBT TO ASSETS= TOTAL DEBT / TOTAL ASSETS

2007 = 155083177/ 157144043 = 0.98:1 2008 = 202300314/ 185600955 = 1.9:1

CASH RATIOCASH RATIO = CASH AND BANK BALANCE/CURRENT LIABILITIES

2007 = 4233180/ 53849037 = 0.078:1 2008 = 4059865/ 73779907 = 0.05:1

RATE ON OPERATING EXPENSES

RATE ON OPERATING EXPENSES = OPERATING EXPENSES/NET SALES*100

2007 = 10281179/ 78554483*100 = 13.08% 2008 = 36134248/ 99171686*100 = 36.43%

The overall condition of company is so week

• It acquire 36% loss in 2008 which is almost 20% higher than 2007• The equity portion of company is negative because company has negative

reserve • The company accumulated loss is higher then their reserve because company

sustained consistently loss in previous 4-years• The liability side of company is higher than 2007 which means that if

company sold her all assets than she will not able to pay-off their debts

27

• The tax advantage of company is nullify because off loss• Company C.O.G.S of company is 94% as compare to their sales • The Finance cost of company is 9.1% in 2008 which is higher than Gross

profit

REASONS:

1. The major reason for increase of C.O.G.S is of increase in oil prices during 2008 which is up-to 148$ per barrel

2. The second major reason for losses is increase in dollar prices which is in the form of Exchange loss-net(24%) higher than 2007

STEPS TO REDUCE LOSSES:

1. The company hedge the oil price by prevent from losses 2. The company in money market make future and forward contract

to beware of increase in dollar prices 3. The company additional tax in previous year which is adjusted in

2008 as deferred tax liability which reduced company net losses4. The company will require heavy investment to run their operation

because company has negative working capital ratio.

28

29