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Strategic Marketing at Tiger Airlines

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Strategic Marketing at Tiger Airlines Customer Relation @ Tiger Airways Indra Adhikari Bader Alfuntukh Abdulaziz Binzamil July 2014 0 Table of Content 1. Introduction ........................................................................................................ 2 2. Financial situation ............................................................................................... 2 3. Positioning of Tiger Airways ................................................................................ 3 4. Customer Analysis .............................................................................................. 6 5. Internal Business Issues ...................................................................................... 6 6. Innovation .......................................................................................................... 7 7. Macro environment analysis ............................................................................... 8 7.1 Economical factors ..................................................................................................................................... 8 7.2 Political factor ............................................................................................................................................... 8 7.3 Technological factor ................................................................................................................................... 8 7.4 Legal factors .................................................................................................................................................. 9 7.5 Market competition .................................................................................................................................... 9 7.6 Natural events ............................................................................................................................................... 9 8. Industry Analysis ............................................................................................... 10 9. Competition Analysis ........................................................................................ 11 10. SWOT Analysis ................................................................................................ 12 10.1 Strengths of the Tiger Airways ........................................................................................................ 12 10.2 Weaknesses of Tiger Airways .......................................................................................................... 12 10.3 Opportunities for Tiger Airways ..................................................................................................... 13 10.4 Threats for Tiger Airways .................................................................................................................. 13 11. TOWS Matrix .................................................................................................. 14 11.1 WO Strategies .......................................................................................................................................... 14 11.2 ST strategies ............................................................................................................................................. 14 11.3 SO strategies ............................................................................................................................................ 15 11.4 WT Strategies .......................................................................................................................................... 15 12. Recommendations .......................................................................................... 15 13. Conclusion ...................................................................................................... 16 References ............................................................................................................ 17 Appendices ........................................................................................................... 19 1 1. Introduction Tiger Airways Private Limited (established in 2004) is headquartered in Singapore's Changi International Airport. The company comprise of Tiger Air Singapore, Tiger Airways Australia and Tiger Airways Mandala (Indonesia) along with newly announced Tiger Airways Philippines and Tiger Air Taiwan. The company abandoned the previous ventures Incheon Airways (Korea) and Thai Tigerair. The first three constituents of the company collectively have a fleet of 48 Airbus A320-family, flying to 50 destinations in 14 countries. Tiger Airways has fundamentally no loyal customers. Many choose it when all others are book out or are very expensive to bear. Thus, the biggest challenge Tiger Airways facing today is the loosing customer base. This research will focus on why Tiger is loosing customers. Of the many reasons, unfriendly staffs and ignorance to customer inquiries are causes for Tiger not being able to attract more customers. According to Marketing Magazine, customer satisfaction with Tiger Australia in 2012 June was 64 per cent. Jetstar’s was 65 per cent, Virgin’s 8 per cent and Qantas’ was 80 per cent. (Marketing Magazine, June 2012) 2. Financial situation The company has poor history of financial performance. It is operating in losses for several years except few. The airlines company reported a loss after tax of $118.5 million, including $88.3 million in exceptional charges, for the quarter ended 2 31 December 2013, compared to a profit after tax of $2.0 million recorded in the previous corresponding quarter (Release 24 January 2014). The company had performed better last year after completing the sale of Tiger Australia shares to Virgin Australia but this positive business outlook did not last for long. The table 1 in appendix shows a brief financial status of the Tiger Airways in the last two fiscal years (Tigerair 2013). The company’s operating margin (Table 2 in appendix) and EBT tells us that the company is actually operating in losses. Asset turn over is less than 1 and ROA (Table 3 in appendix) is negative which indicates the company has not been able to use its assets to generate profits. Even the company has failed to make any headway on ROE and interest coverage. Negative interest coverage means the financial institutions would not be happy to provide further loans to the company while negative ROE would incite public not to invest in the company or sell their shares. This would have severe consequences on the financial situation of the company. The company has problem with cash flow (Chart 1 in appendix). It has not been able to generate enough cash flow to meet the requirements. Failing to generate enough cash flow means Tiger Airways has to depend on loans or equity for the daily cash needs. Equity earnings are spent on servicing the debt. The current and quick ratios show the company is not in a position to pay back its current debt (Chart 2 in appendix). 3. Positioning of Tiger Airways The company operates in the region where many budget airlines such as Air Asia, Air Indus, Easter Jet, Jeju Air, Mihin Lanka, Cebu Pacific, 3 IndiGo, GoAir, JetConnect etc. The increased economic activities in the region have slightly increased the flow of people thereby widening the scope of aviation industry. However, the growth of aviation industry has surpassed the increased need of the business travel and tourism. Further, the increase economic activities means, people look for business flights rather than economy class, which the Tiger Airways has not looked into. The region is very competitive. The Porter’s model describes the five forces of competition, which Tiger is facing. The following figure 1 shows the Porter’s five forces model of competition. Threat of new entrants Bargaining Threat of Degree of Rivalry power of substitutes among competitors supplier Bargaining power of customers Figure 3.1: Porter’s five forces model Lets draw line to connect this theory with the current situation of Tiger Airlines. Competition in the region where Tiger operates is out stretched. As mentioned above there are so many budget airlines for customers to choose from. Under such circumstances, customers have greater bargaining power. Also, the customers have ample 4 substitutes to ignore Tiger because of various reasons including poor customer service. The other budget airlines have come up with better deal and better services compared to Tiger. These form the substitute for the customers looking for economy class travel. The local agents, the customer supplier for Tiger, also have bargaining space to increase commission. Not immediate but Tiger also faces potential threats of new budget airlines entering the market. It appears but not in entirety that Tiger Airways focuses its policy on providing services on cheaper rates. Lets see the three generic strategies arising out of the Porter’s five forces model. Figure 3.2: Strategies based on Porter’s model Low cost leadership Differentiation Stick in the middle Focus on cost Focus on differentiation Narrow (Target market) Broad Cost (Basis of competitive advantage) Differentiation Tiger Airways is a budget carrier but it has not been able to market its cheap brand successfully. It has heavily depended on Singapore Airlines for marketing and networking. It means, the marketing strategies of the company are not effective. The company failed to position itself as low cost leadership. 5 4. Customer Analysis Tiger Airlines’ customers mostly are from developing
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