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 SWOT Analysis: An Introduction SWOT Analysis Workshop Work Plan Industry & Organizational Profile International Airlines Industry Bangladesh Airlines Industry Elements of Internal and External Environment List of Internal Strengths & Weaknesses List of Opportunities & Threats SWOT Format Strategy Formulation References Page No. 3 4 4 4-8 8 8 9 9 10 11 12 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 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:
step 1 prepare a workplan for conducting the SWOT analysis

step 2

prepare an organizational profile of the selected organization identify and prepare a list of possible internal environmantal elements which are relevent to the selected organization prepare a list of internal strength and internal weakness on the basis of the identified elements in step 3 identify and prepare a list of external environmantal factors which are likely to haveprofound impact on the organization prepare a list of general environment releted opportunities and threats and industry releted opportunies and threats prepare a SWOT format

step 3

step 4

step 5

step 6

step 7

SWOT Analysis Workshop 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

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 airlines 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, Dcheck on DC10-30 and A310-300 in its hangar complex at Dhaka.

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, Bimans 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 countrys 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 belowEmployee Level MD & CEO Executive Director Cockpit Crew General manager & Equivalent Dy. General Manager & Equivalent Manager/Asst. manager/officer & Equivalent Staff Total 1945 2824 336 381 --2281 3205 701 25 -726 Permanent -03 132 13 30 Contractual 01 03 14 01 01 Casual -----Total 01 06 146 14 31

ORGANOGRAM The organization is extremely red taped and bureaucratic causing delayed and costly decision making and inefficiency in operation.

Chairman

Board of Directors

MD & CEO Directorates

Directors

Planning

Administra tion GM DGM Manager Asst. Manager Officer Jun. Officer Supervisor Assistant M.L.S.S

Engineerin g

Customer Service Planning

Finance

Flight Operation Planning

Store & Purchase

Marketing & Sales Planning

FIXED ASSET LESS DEORECIATION 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 Biman Bangladesh Airlines (BBA) Biman Poultry Complex (BPC) Biman Flight Catering Center (FCC) 15,803,855,303 1,215,958,206 192,239,779 2008-09 16,154,051,948 1,214,724,483 195,892,076

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 Coxs 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 Delhi Jeddah London Riyadh Bahrain Bangkok Calcutta Katmandu Rome Hongkong Dubai Karachi Kualalumpur Brussels Singapore New York Doha Paris Muscat Mumbai Frankfurt Kuwait Tokyo Yangoon

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 Human Resources Management Physical & financial Resources Technological Resources Organizational culture External Environmental Elements General environmental elements Economic Environment Political Environment Demographic Environment Socio-cultural Environment Industry environmental elements Competitors Substitute 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 A. Biman is in the process of procuring more new generation aircraft such as Boeing 777-300ER, 787-8 Technological resources and 737-800 for its fleet. Human Resources B. Experienced technical personnel Physical & financial resources C. Adequate physical and financial resources Weakness A. Politically

influenced

appointment

of

top

level Management Human Resources Management

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

Organizational culture

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 elements

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. Demographic environment

General Environment Opportunities

Socio-cultural environment

Industry Environment Opportunities

A. Exit of British airways from Dhaka to London direct route operation provide Competitors chance to gain the market share and less competition B. Postponement of GMG Airlines has opened a Substitute product way to capture more market share C. Poor infrastructure and service of road and water transportation between city and major towns A. Volatile energy market frequently increasing Political environment the cost of fuel B. Global economic recession affecting the Economic frequency of travel environment A. Emergence of new domestic airlines, i.e. Regent, Bestway, and their expansion in Competitors international routes. B. Worldwide industry slow growth. During 2001 to 2006 the rate of air travel globally increased at 3.7 percent per year. Economic features Profitability is generally low, in the range of 2-3% net profit after interest and tax1. C. Procurement of third generation energy Competitors efficient aircrafts by competitors.

Threats General Environment Threats

Industry Environment Threats

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

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SWOT Format The following table will illustrate the summary of the total SWOT analysis: Serial Statements Symbols no Internal environment Strengths Weaknesses Biman is in the process of procuring more new 1 generation aircraft such as Boeing 777-300ER, 7878 and 737-800 for its fleet. Experienced technical personnel 2 3 4 Adequate physical and financial resources Politically influenced appointment of top level management and top level personnel with improper experience and expertise in airline business. Lack of transparency in operation like maintenance and procurement of aircraft. Lack of motivation among personnel Political influence and bureaucratic organization

5 6 7

External environment Industry environment Opportunities Threats Exit of British airways from Bangladesh operation 8 provide chance to gain the market share and less competition Poor infrastructure and service of road and water 9 transportation between city and major towns Emergence of new domestic airlines, i.e. Regent, 10 Bestway. And their expansion in international routes. Worldwide industry slow growth. During 2001 to 11 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. Procurement of third generation energy efficient 12 aircrafts by competitors. General environment Opportunities Threats Unexplored market in middle east, east Asia, Asia 13 pacific, Europe, America; where Biman does not have direct flight and potential domestic market. Preference over airline than other means of 14 transportation because of rise domestic economic activity and poor condition of other transportation system. Volatile energy market frequently increasing the 15 cost of fuel

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

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Global economic recession affecting the frequency of travel

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 areIts 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

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Conclusion
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 peoples 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.

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References

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

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