SzeChuan Airlines
Transcript of SzeChuan Airlines
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The airline was established on 19 September 1986, with operations starting 14
July 1988 between Chengdu and Wanzhou. In August 2002 it was reorganised and the
Sichuan Airlines Group, which is owned by the provincial government, became the major shareholder (40%). The other shareholders are China Southern Airlines (39%), Shandong
Airlines (10%), Shanghai Airlines (10%) and Gingko Restaurant (1%). It employs 1,844
staff.
The company has consistently made profits for eight years. As the domestic air
transportation market becomes increasingly competitive, it is continuously exploitingnew markets and seeking every possibility both inside and outside China. It has entered
into partnerships with numerous domestic and international airlines supplying passenger
or cargo transportation services that suit all requirements.
3.2 Competitor Analysis
Sichuan Airlines is an international company, and going global invites a lot of competition. Sichuan Airlines has to deal with the competition of local companies in the
same field- Airline services. Competition for Sichuan Airlines would also be encounteredin the virtual world-the INTERNET. As they indulge into the use of modern technology
such as the public domain would invite competition on the global scale.
Sichuan Airlines would encounter numerous constraints, as an international
enterprise, it would have to deal with government policies and airport pricing that are
inherent in the local markets they serve not excluding their cultural differences and
values of the community.
Different localities and countries have different technological standards, and
quality control policies, which Sichuan Airlines would have to adhere to, by adherence tothese policies; certain intended developments may be possible in certain communities but
not acceptable in others.
3.3 Collaborations
With the present corporate mechanism, Sichuan Airlines has accomplished
substantial Cooperation in various forms with the shareholders, including Code sharing,ticket price control, a frequent flyer program, sales agency system, and transport and
marketing Networks. The advanced modern aircraft, the flexible effective marketing
strategy and policies and the efficient operational environment have laid a solidfoundation for the rapid, steady, sustainable and harmonious development of the
company.
TravelSky Technology Limited, a provider of information technology solutions
for China's air travel and tourism industries, has reached a strategic cooperation
agreement with Sichuan Airlines Company Limited to provide the carrier with
information services and support as well. Under the agreement, TravelSky will offer
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technology and information services including traveler service systems, online value-
added systems, and frequent flier products.
Also, Sichuan Province Airport Group had signed a memorandum of cooperation
with Japan Airport Terminal Company, with the intention of providing a non-stop service
between Chengdu, the capital of Sichuan Province, and Tokyo. The cooperation is aimedat launching regular direct flights linking Chengdu Shuangliu International Airport and
Tokyo Haneda Airport. Currently, passengers from Chengdu have to transfer in Beijing.
3.4 Environment (PESTLE)
Political
Sichuan Airlines has been very fortunate during recent years. The political scene
in the region has been quite favourable because most of the countries have been makingagreements that facilitate better trade between countries especially in relation to the
aviation sector. These countries have signed agreements between themselves and alsowith other countries. These agreements have opened up Sichuan Airlines to the world and
have provided ready made markets for the Airline Company.
Any aviation company must be ready to tackle high fuel costs and Sichuan
Airlines is no exception,. In previous years, the country reported an increase in fuel
expenditure of seven percent from the previous year. Fuel costs represent the highest
form of expenditure in the company as this has really eaten into their profits.
Economic
The Asian Pacific region has been nurturing its economy at a rapid pace. Most of
the countries located there are becoming more mature. These economies are growing at a
substantial rate consequently affecting their overall income. This means that most of them are earning more revenue per capita and they can therefore afford to use air
transport. This is probably the reason why Sichuan Airlines has been steadily growing
over the past few years. Markets are changing rapidly and more governments in the
region are streamlining their economic policies so as to suite the Airline industry. Airlinetraffic in the rest of the world has reduced drastically.
Social
Sichuan Airlines operates in a region where there are numerous employees and
workers. Most of these workers rarely demand for high compensation. Labour issues areadversely affecting employers in the region and also in the rest of the world. Workers are
becoming increasingly ware of their potential and most of them are demanding more.
Many Airline Companies are increasingly recruiting different types of labourers. This is
especially with regard to the fact that there are numerous types of Aircrafts in any one
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type of Airline. Sichuan Airlines has not bought too many varieties of Aircrafts.
Consequently, there is room for the Company to grow and without having to spend too
much in the labour section.
Technological
The world had a technology boom in the nineties. However, there was a
technology but in the decade 2000. Companies that were using technology to gain
competitive advantage over their players in the industry may now have to look for other sources of competitive advantage.
Additionally, Airline companies have to deal with the advent of better informed
clients. Most people are now more knowledgeable about the reputable companies. Theycan get all the strengths and weaknesses about a given firm using the internet. For
instance, clients tend to shy away from airlines with numerous stopovers in comparison
to those ones that have direct routes. These are al issues that can be checked out at the
‘touch of a button'. Sichuan Airlines has been affected by this issue because it needs toascertain that it offers better services to its clients and that it can meet future demand.
Legal
It should be noted that in the past, most governments within the Asian Pacificused to operate under a paternal government policy. Governments felt that thy had to
protect airlines against external factors, but after the recent policy changes, Airline
industries have now been opened up to competition and this is the reason why Sichuan
Airlines have grown. They can now follow the rules of economics to sustain competitiveadvantage instead of worrying about government hindrances. This means that there are
less legal hitches when running operation in the region.
Environmental
It is a known fact that Airline Companies need to adopt strategies that providethem with a good corporate image. For instance, some Airlines may decide to take part in
environmental sustainability projects such as tree planting. Additionally, some companies
may also exercise extra caution in terms of the quantity of waste that they send to the
landfill. This is something that seems to be taking a lot of attention from Airlinecompanies. Lastly, the issue of recycling is also taking up a lot of precedence in the
Airline industry. Some Companies are offering recyclable cutlery to their clients in order
to further this campaign. All in all, it should be noted that most environmental campaignsin the Airline industry are part of the corporate responsibility strategy within a specific
Airline Company.
3.5 SWOT Analysis
Strengths
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Sichuan Airlines is a vibrant company that is involved in offering a simple “no
frills” service at fares that are on average significantly lower than those offered bytraditional full-service airlines.
Another observable strength of Sichuan Airlines would be well-rounded andmanaged business and their turnover rate; this gives them an added advantage over other
Airlines.
Sichuan Airlines also employs and trains staffs with superior interpersonal skills,
and they manage the entire creative process effectively.
Weakness
Sichuan Airlines at a glance would appear to be a weakness-free enterprise, but
there are underlying weaknesses inherent at Sichuan Airlines. One of such includesminimal technical staff workers and overdependence on few key staff.
Sichuan Airlines would need an enormous number of technical professionals,
especially in the implementation of their internet booking and distributors.
Sichuan Airlines also would need to have high technological equipments, and
connections to sustain and serve such a huge network of company subsidiaries and
affiliates, as appropriate.
Opportunity
Sichuan Airlines stands at the gate of profitable opportunities, their recent
developments and intended expansions will give them a global exposition. As they
venture into internet booking and ticketless services for their marketing processes, theywould be open to electronic commerce business solutions for their enterprise.
Sichuan Airlines stands to encounter other opportunities like:
• Export markets offering great potential
• Distribution channels seeking new products
• Scope to diversify into related market segments
Threats
Even though Sichuan Airlines is currently on the peaks of success, they would becareful and not nonchalant to the threats they are bound to encounter.
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One of such threats would be security of their networks. The internet is a public
domain and as such is vulnerable to attacks from hackers and viruses, Sichuan Airlines
ought to be conscious of these threats and have proper plans and control to counter any of these.
Another threat to Sichuan Airlines is from the local competitors in the variouscountries they are having affiliates or subsidiaries. Sichuan Airlines needs to be in
accurate pace with the market demands and policies for these local territories, because
economic slowdown could reduce demand.
4.0 OBJECTIVES
4.1 Marketing Objectives
• the stabilization and increase of operational and services performance
• to provide extensive communication to all stakeholders.
4.2 Financial Objectives
• assurance of the airlines financial liquidity
• reduce the financial losses
5.0 MARKRT SEGMENTATION
Sichuan Airlines segment the market into two major segments, one profitable
(Business Travelers) and one unprofitable (Leisure Travelers). These two segments can
further be broken down by average length of trip, frequency of trips, and loyalty to a
certain airline.
Business travelers are very profitable for airlines because they tend to buy their
tickets at the last minute when prices are higher and their schedules are not flexibleenough to change flights. They often don’t have time to go with a substitute means of
travel. Business travelers pay for the convenience factor. In an economic sense, the price
is relatively inelastic.
Leisure travelers are not nearly as profitable because they are more willing to
change flights and/or modes of travel based on prices. The leisure traveler segment isvery price elastic. This market segment requires a cost leadership method will dominate
this market probably in the end forcing out the traditional carriers who can’t match thelow fixed cost structures of the cost leaders.
IDENTIFICATION OF TARGET MARKET
Target Market is a set of buyers sharing common needs or characteristics that thecompany decides to serve. There are three key factors to target market selection:
• Segment size and growth
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• Segment structural attractiveness
• Businesses objectives and resources
WAYS TAKING TO IDENTIFY THEIR TARGET MARKET
For Sichuan Airlines, the following are some of element identified that Szechuan
Airlines used to identify their target market and formed a niche market.
Branding
Sichuan Airlines went into intensive General advertisements and other high profile
activities, which contributed, to the high offering of their company's image. These pointsof contact with their target customer help them to mold their image, which in turn created
loyalty from their customers.
PhilanthropyDonating money, services, and/or time can build trust and a positive image for the
business. Philanthropy contributes both toward a company’s branding efforts and internal
well-being. Sichuan Airlines embark on this to build and attract more customers. Withthis incentive and philanthropy, more and more customers are attracted to their business.
New Product/services Pipeline
New products in development represent your future sales. Sichuan Airlines has extended
its services to different part of the world. Sichuan Airlines was initially a local company
but it has become international with its extension of its services to different part of the
world to meet up with their market. Sichuan Airlines get feedback from their customers
or potential target market, and they designed new services to meet their needs, this practice is ensuring a demand for their products in the future.
Reduced Price Sales
This was one of the basics of securing a target market for Sichuan Airlines. They reduced
their price to suit their class of customers. Sichuan Airlines saw a need for a lot of low pay salary citizens who could not afford the money to travel home. With the introduction
of their services of low fares, most people can travel home and most people that can only
afford to travel once could travel up to three times with their cheaper fares. This limited
time sales encourage customers to act. You likely have customers intending to buy buthave not "gotten around to it". Holding a reduced price sale will give them incentive to
purchase.
Group Discounts and Offers
Discounts or other offers to a specific group can help exposure your business to new
customers, resulting in a sales surge. Sichuan Airlines is a ticketless Airline that allowscustomers to purchase their ticket online with at a discounted rate. They also have a
scheme of group discount and this help to get more target market, especially internet
based customers.
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Foreign workers and Contractors strategy
Sichuan Airlines also target most foreign workers such as those from Indonesia,Singapore, Thailand, Macau who may not afford the expensive flight home and offer
them the cheap fare which attracted most of them as would go home very often without
paying much.
MARKETING MIX ANALYSIS
In order to achieve its marketing objectives Sichuan Airlines needs to have a strategy that
includes different elements - the various parts of the marketing mix. Calling it, a mix is to
make sure one get the balance right between the different elements. Marketing mix is acombination of marketing tools that are used to satisfy customers and company
objectives. Consumers often call the marketing mix "the offering." An offer is controlled
by the following variables that are often referred to as the four Ps in marketing:
•
Product• Price
• Place (Distribution)
• Promotion
PRODUCT /SERVICES
The term "product" refers to tangible, physical products as well as services. It also means
defining the characteristics of your product or service to meet the customers' needs
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6.0 ALTERNATIVE MARKETING STRATEGIES
Sichuan Airlines Launches Credit Card Telephone Payment Service
To facilitate passengers booking tickets during the Spring Festival period,
Sichuan Airlines has launched a credit card telephone payment service in cooperationwith the third party payment service provider YeePay.com.
The new service, which is applicable to credit cards from more than ten banks,
allows passengers to book air tickets and complete the payment by making a telephonecall. By calling Sichuan Airline's 24-hour service hotline 028-88888888, consumers can
inquiry about flight schedules, book an air ticket, and pay for it.
Sichuan Airlines Signs Deal With Abacus
Sichuan Airlines is now the ninth mainland China carrier/group to sign on toAbacus' reservation inventory.
Sichuan Airlines' Direct Connect Availability (DCA) participation with Abacus isits first with a foreign Global Distribution Service (GDS) and the move is expected to
allow the airline to attract a larger share of the domestic and international travel market.
Through the Abacus DCA service, Sichuan Airlines is given the power to exercise point-of-sale quota allocation and control their flight inventory hence Abacus subscribers
can now receive real-time flight status and seat counts directly from their own
reservations system.
Porter's Generic Strategies
Companies can achieve competitive advantages essentially by differentiating their
products and services from those of competitors and through low costs. Firms can target
their products by a broad target, thereby covering most of the marketplace, or they canfocus on a narrow target in the market (Lynch, 2003). According to Porter, there are three
generic strategies that a company can undertake to attain competitive advantage: cost
leadership, differentiation, and focus..
Cost leadership
Shenzhen Airlines following this strategy place emphasis on cost reduction in every
activity in the value chain. It is important to note that a company might be a cost leader
but that does not necessarily imply that the company’s products would have a low price.
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In certain instances, Shenzhen Airlines can for instance charge an average price while
following the low cost leadership strategy and reinvest the extra profits into the business.
Other examples of companies following a cost leadership strategy include RyanAir, andeasyJet, in airlines.
Differentiation
When Shenzhen Airlines differentiates its products, it is often able to charge a premium
price for its products or services in the market. Some general examples of differentiation
include better service levels to customers, better product performance etc. in comparison
with the existing competitors.
Focus
Shenzhen Airlines can make use of the focus strategy by focusing on a specificniche in the market and offering specialised products for that niche. This is why the focus
strategy is also sometimes referred to as the niche strategy (Lynch, 2003). Therefore,competitive advantage can be achieved only in Shenzhen Airlines’ target segments by
employing the focus strategy. Shenzhen Airlines can make use of the cost leadership or
differentiation approach with regard to the focus strategy. In that, Shenzhen Airlinesusing the cost focus approach would aim for a cost advantage in its target segment only.
If Shenzhen Airlines is using the differentiation focus approach, it would aim for
differentiation in its target segment only, and not the overall market.
BCG Matrix
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7.0 SELECTED MARKETING STRATEGIES (4 P’S)
Sichuan Airlines has relatively good strategy and marketing mix since they offer their
services in relation to their mission statement. However, they are few things I will
recommend which will help them to generate more income which are illustrated asfollows:
Product / Services
Their quality of service is not too fantastic, from the research carried and feedback fromthe users, most users complained that Sichuan Airlines does not follow the scheduling
hours of flight, which implies that customers are delayed for a period before traveling.
This shabby offering could damage their image and services as customers may seek for alternatives. If Sichuan Airlines should work on this, most unsatisfied customer could
return and customer will begin to speak of their satisfaction, which will improve their
brand image and generate more revenues at the end.
Price
It is true that Sichuan Airlines pricing form part their product. It will be fine for SichuanAirlines to maintain their lower fare-pricing model not to increase it in order to avoid
losing the target market they have fought to identify.
Pricing Strategies
a) Premium Pricing.
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A company may use a high price where there is uniqueness about the product or
service. This approach can be used by Sichuan Airlines where a substantial
competitive advantage exists. Such high prices are charge for luxuries of flights.
b) Penetration Pricing.
The price can be charged by Sichuan Airlines for products and services which is set
artificially low in order to gain market share. Once this is achieved, the price is
increased.
c) Economy Pricing.
In this approach, the cost of marketing and manufacture can be kept at a minimum by
Sichuan Airlines. .
d) Optional Product Pricing.
Companies will attempt to increase the amount customer spend once they start to buy.
Optional 'extras' increase the overall price of the product or service. For exampleSichuan Airlines can charge for optional extras such as guaranteeing a window seat or
reserving a row of seats next to each other.
e) Promotional Pricing.
Pricing to promote a product is a very common application. There are many examplesof promotional pricing that can be used by Sichuan Airlines including approaches
such as BOGOF (Buy One Get One Free).
f) Value Pricing.
This approach can be used by Sichuan Airlines where external factors such asrecession or increased competition force companies to provide 'value' products and
services to retain sales.
Place/ Distribution
Sichuan Airlines has been thriving heavily lately. They have opened up branches in
different place in order to reach their target market. More destination and branches should
be opened to enable more and more customers to join the troupe and to serve the need of their target market
Promotion
More promotional activities should be engaged to attract more customers and to createawareness of their presence and what services they offer. It should be their task to
develop many advertising models to achieve this. This is another way of selling their
brand to the world.
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8.0 IMPLEMENTATION
Sichuan Airlines intends to cut out new territory as it goes about marketing itself.
While it will clearly serve the target markets of Southeastern Europe and Turkey, it will just as clearly be a different kind of player on the field, and will seek to be known not
only as a Western airline, but at the cutting edge of the aviation business in Europe.
Sichuan Airlines’ emphasis on the latest information and electronic technology,
and its stress on comfort, convenience, safety and customer service, will be cornerstones
on which the marketing strategy will be built.
Sichuan Airlines will utilize a combination of methods to achieve the recognition
that it both desires and needs. A fairly large advertising budget is planned to buy the
space and time to get its name and message in front of the largest possible group of
potential customers that it can.
Sichuan Airlines will also utilize public relations to good advantage to extend andsupplement its advertising budget.
9.0 BUDGET
The current budget and controlling processes (what is measured when and where)
and analyze the cash flow (monthly, quarterly) with a focus on:
• monthly cash requirement (forecast)
• existing debt in detail and develop a priority list
• accounts payable with all important suppliers• accounts receivable
• excess inventories (engines, rotables, spare parts)
• cash collection process
On the other hand, a critical financial situation arises with performance
irregularities. Thus, the performance data will be analyzed with a focus on operational
and service indicators (e.g. punctuality, reliability, customer satisfaction, etc.) and shortterm improvement actions will be defined.
10.0 CONCLUSION
Sichuan Airlines business model has been analyzed in conjunction with themarketing mix that is employed to identify its target Market Sichuan Airlines’ philosophy
of low fares is aimed to make flying affordable for everyone. Sichuan Airlines also aims
at making travel easy, convenient and fun for its guests. Their philosophy is vital inshaping Sichuan Airlines marketing mix. Their services and their pricing work together
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to identify their target market, however, their promotional activities and their
distributional channel is aggressive developed, planned, and executed to target both
foreigners and locals alike. Moreover, more advertising model should be developed andSzechuan Airlines needs to identify more suitable areas for distribution as more and more
loss potential target could be captured which will at end generate huge revenue for
Sichuan Airlines.
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