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Graduate capstone  presentation Graduate capstone presentation Presentation Transcript

  • ESTABLISHING AIR MANO TO PROVIDE REGIONAL AIR TRAVELS AMONGST THE MANO RIVER UNION COUNTRIES –WEST AFRICA -BY PRINCE YEAKEHSON( LL.M,MBA)
  •  The Mano River Union (MRU) is an international association established in 1973 between Liberia and Sierra Leone. In 1980, Guinea joined the union. The goal of the Union was to foster economic cooperation among the countries. It is named after the Mano River which begins in the Guinea highlands and forms a border between Liberia and Sierra Leone. Due to conflicts involving these countries, the objectives of the Union has not be achieved. However, on May 20, 2004, the Union was reactivated at a summit of the three leaders of the Mano River Union States. On April 1, 2008, Cote d'Ivoire agreed to join the union. Cote d’Ivoire’s agreement to join the MRU brings the Union membership to four. Despite the civil wars and civil insurrections in these four countries, the population growth is progressive and economic activities are again picking up. There is no history of an existing or established regional air transport to the four countries. Although there are international flights like Delta, Brussels and France Airlines that fly to these countries, thousands of businessmen spent days, weeks or months on commercial vehicles to travel from one of these countries to the next simply because they cannot afford high fares demanded by these international airlines. I think the establishment of a regional airline (Air Mano) to be named after the exiting union that ties the four countries, economic activities will be stimulated and this will bring a great investment return to my business.
  •  This paper will endeavor to analyze the current situation in the Mano River Union region especially regarding the stability of the region for airline investment purpose, Strategic Direction (mission statement) of Air Mano ,External Environment, Opportunities for Growth , Industry Rivals positioned value chain and competitive strategy ( marketing strategies) and pro forma income statement. Conclusion and references will follow next.
  •  Although Liberia, Guinea and Sierra Leone have common aeronautical authority known as the Robert Flight Information Region (RFIR) which is responsible to monitor the airspace of the three countries and to collect over flight fees for aircrafts plying their collective airspace, the three countries have failed to establish and fund regional flights in the MRU. There was plan to establish one in the past but failed. They failed because of political interferences from the MRU countries leaders. There is no exiting regional airline industry in the Mano Rive Union to take advantage of this economic zone.
  •  The airlines that operate in these countries are concerned with international operations rather than regional. Although some of them sometimes have schedule flight like from Brussels- Liberia - Cote d’Ivoire-Brussels on Brussels Airline; Atlanta-Ghana-Liberia –Atlanta on Delta Airline and France-Guinea-Liberia –France or France – Senegal-Freetown- France on France Airways, there is no regional fight to go the route of Liberia-Freetown-Guinea- Cote d’Ivoire-Liberia like the proposed Air Mano will be engage in.
  •  With the establishment of Air Mano as a full flesh regional flight, the question of competition will be very slim as many people will not want to go through the hurdles of connecting with two points as posed by these international airlines. Although I recognize the fact that Air Mano will be faced with enormous challenges ranging from acquisition of a demand seated aircraft to confidence building in the region to prove reliability with schedule flights (even if it means to fly with empty seats), in the long run, there will be huge investment returns. In short, the concept of this business is regional air transportation.
  •  3.1. The mission of Air Mano is to serve the Mano River Union Member Countries by providing alternative and feasible air transport services.  3.2. The objective/vision of Air Mano is fundamental to the purpose of any business gear towards minimizing cost at a relative gain through investment returns thus actualized by delivering timely and meaningful air transport services in the region.
  •  To actualized this objective/vision, I will have to seek regional shareholders ( Common Stock holders) from Guinea, Liberia, Sierra Leone, and Cote d’Ivoire to increase ( say my $1.6 Million venture capital) to enable us buy at least two 30 seated aircrafts whereby we will use one for standby.
  •  3.3. The philosophy of Air Mano is enshrined in its mission statement: to serve the public happily and timely at reasonable cost for better service. This philosophy will be reflected by the management control systems we will employ to gain the public attention and to pull them over from the commercial vehicles they have travelled by long distances in the past for days, weeks and months and to create an air service environment for them to travel by air safely.
  •  Air Manor will be incorporated under the laws of the Republic of Liberia and headquartered in Monrovia. It will have branch offices in Guinea, Sierra Leone, and Cote d’Ivoire to be headed by a branch manager who shall report to the General Manager. The General Manger shall be based in Monrovia, Republic of Liberia. He/she shall implement the corporate responsibility of Air Mano in the region.
  •  Research and development shall be headed by a director who shall be responsible for research, planning and development of Air Mano. In short, the director for R&D shall control the economic affairs of the company.  Corporate Finance shall be headed by a a comptroller who shall be responsible for the corporate finance in for all locations in Liberia, Guinea, Sierra Leone and Cote d'ivoire.  Sales force/Sales Department shall be responsible for sales strategies in the region regarding promotion, pricing/airfare structuring to meet market demand.
  •  BOARD OF DIRECTORS  HEADQUARTER(MONROVIA)  RESEARCH & DEVELOPMENT  CORPRATE FINANCE  SALES FORCE/marketing BRANCH OFFICE (FREETOWN) BRANCH OFFICE (CONAKRY) BRANCH OFFICE (ABIDJAN)
  •  The management principles/practices that are being implemented at Air Mano will be done through: Planning, Organizing, Leading, and Controlling.  Planning-The planning and research department will be under one supervising manager. Planning will entails forecasting/ projecting the traffic for the year, ticket sales expected for the year, maintenance schedule and fuel cost estimates, and outline or suggest how to achieve these in 5 or 10 years. Implementations to achieve the 5 or 10 years goal will be divided into objectives/ phases: Phase 1, 2, 3 , etc. or Year 1, 2, 3 and so on.
  •  For example, Year 1 goal would be to incorporate Air Mano, rent an office space in Monrovia and have it staffed, launch the company in Liberia and engage in maximum publicities in all the Mano River Union Countries to create awareness of our regional flight operations, purchase the company’s first aircraft, and launch the company’s website where the public can transact business with our company anywhere they are in the world.
  •  Year 2 would focus more on establishing branch offices in each Mano River Union Countries and year 2 would focus on purchasing additional aircrafts to increase our fleet in the region depending on the demand, etc.
  •  Regarding the organization of implementation of these plans outlined supra, the Sales Force Department which will be headed by another supervising manager, will shoulder most of the responsibilities of implementation of the Planning Department’s research and plans for the company. For example, the Sales Force Department job would be publicity/ marketing, and sales.
  •  Leading and control will be the sole responsibility of management and management will be headed by a General Manager who shall run the day today activities of Air Mano. He shall coordinate operational activities of Air Mano in the region which shall include establishing branch officers in the Mano River Union member countries, hiring and firing employees, purchasing aircrafts and maintenance equipment for the company and making sure shareholders values are paramount and not entrenching himself/herself. He shall also ensure that the corporate finances are well managed by the Department of Finance.
  •  4.1. Opportunities for Growth  According to Thomas et al (2012), the macro-economic environment encompasses the broad environmental context in which a company’s industry is situated. It includes several components: population demographics,; societal values and life styles, political, legal and regulatory factor, the natural environment and ecological factors, global forces, etc.  As mentioned in the introduction to this paper, the four member countries of the MRU were struck by civil wars and civil unrest which destroyed meaningful economic activities in this region and it could not meet its objectives to foster trade and economic cooperation for two decades (Conference Report- ECOWAS, (2010).
  •  Today, the guns are silent in this region and people are trying to rebuild their lives again. Although there are international flights like Delta, Brussels and France Airlines that fly to these Mano River Union countries, thousands of businessmen spent days, weeks or months on commercial vehicles and by foot to travel from one of these countries to the next; simply because they cannot afford high fares demanded by these international air carriers .
  •  I think the establishment of a regional airline (Air Mano) to be named after the exiting union that ties the four countries, economic activities will be stimulated and this will bring great investment return to my business in the long run. In fact, the current population statistics of these four countries are as follow: Liberia: 4.1Million, Cote d’Ivoire: 22 Million, Guinea: 10.8 Million and Sierra Leone 5.8 Million  SOURCE: World population 2011 by country (http://www.prb.org/Publications/Datasheets/2011/world- population-data-sheet.aspx ).
  •  4.2. Industry Rival Positions  The rivals in this industry are the Brussels Airlines, Delta Airlines, and Air France; however, these are international airlines. Although, they fly to these MRU countries, they are not interested in regional operation as Air Mano is proposed to be. For example, Brussels Airlines flies from Brussels- Liberia - Cote d’Ivoire-Brussels; Delta Airlines flies form Atlanta-Ghana-Liberia –Atlanta e and Air France flies from France-Guinea-Liberia –France or France –Senegal-Freetown- France.
  •  It is interesting for my proposed business, to note that none of these international flights is interested in regional operations for my proposed route: Liberia-Freetown-Guinea- Cote d’Ivoire-Liberia. With the establishment of Air Mano as a full flesh regional flight, the question of competition will be very slim as many people will not want to go through the hurdles of connecting with two points as posed by these international airlines.
  •  Although I recognize the fact that Air Mano will be faced with enormous challenges ranging from acquisition of a demand seated aircraft to confidence building in the region to prove reliability with schedule flights (even if it means to fly with empty seats like South West Airlines sometime does in the United States), in the long run, there will be huge investment returns SOURCE: Peter-Donnelly, 2007 and Southwest fact sheet).
  •  According to Thomas et al, (2012), ―resource and capability analysis provides managers with a powerful tool for sizing up the company’s competitive assets and determining whether they can provide the foundation necessary for competitive advantage over market rivals‖. They further assert that it is the fundamental building blocks of its competitive strategy.
  •  And regarding value chain, they put emphasis on cost efficient management and lower costs through economic of scale, experienced and learning curve effects, operating at full capacity, improving supply chain efficiency, minimizing cost at higher output, motivating employees for high customer service and productivity, breaking the line of intermediaries to direct sale to customers at lower cost, etc.
  •  And regarding value chain, they put emphasis on cost efficient management and lower costs through economic of scale, experienced and learning curve effects, operating at full capacity, improving supply chain efficiency, minimizing cost at higher output, motivating employees for high customer service and productivity, breaking the line of intermediaries to direct sale to customers at lower cost, etc.
  •  For Air Manor, the following value chain enhancements will be employed:  6.1. Value Chain Enhancement Idea #1: Operation-Air Manor will operate only three 30 seated aircrafts in the Manor River Union countries. Two will be operated at a time and one be used for standby to avoid any disappointment for our passengers just in case of any technical failure depriving us from take-off at any airport. We hope to run at a full capacity of 24/7 ( 24 hrs a day and 7 days a week).
  •  6.2. Value Chain Enhancement Idea #2 Sales-  Air Mano will endeavor to maintain a low price that we think our market survey data has indicated. We will however ensure not to operate at a lost. Our low price will really be a promotional price but will continue to charge base on affordable economic indicators in the region of our operation and customers. We ourselves will sell Air Mano tickets to our customers to avoid hike in price by intermediaries (travel agencies). In fact, customers will be allowed to purchase Air Mano tickets and book seats online from our website without any hassle.
  •  Although our focus is to offer airline services to the travelling public as our main business, we will however offer duty free services through a mini sale on our aircraft while in flight. Every duty free item sold on our aircraft will have Air Manor printed on the pack or label. Our advertisement budget will be about 40% of our total operation budget for the first year.
  •  We will sell at discount price for families traveling one direction and a 10 % reduction in price for round trip tickets lasting not more than one month. And In our attempt to maintain low airfare, infants (below age 1) as long they don’t occupy a seat in our aircraft, will not be charged a fare. Age 1-12, will be charged the same rate but lower than the fare for age 13 up- ward.
  •  6.3. Value Chain Enhancement Idea #3: Customer Service  Customer service is one key factor in the airline business (Southwest Airlines Fact Sheet).At Air Mano, we will serve our customer honorably and address their concerns /complaints (if any) promptly. By that, we will ensure to have customer complaint hot lines open 24/7 to give them the opportunity to reach our Hotline Customer Complaint Team across the region.
  •  We will also provide a menu on our website for customer complaints and concerns. As mentioned, we will open one branch office in each of the MRU member countries to handle branch matters regarding the sale of tickets and customer’s complaints. We will serve one meal on each of our aircrafts (say from Monrovia- Freetown or from Freetown –Conakry) since the distances between these countries are less than one hour. We will sell mini items on our aircraft at a duty-free price during a flight.
  •  7.1. Marketing Emphasis/Focused Low Cost Provider  Under this theory, Thomas et al, (2012) elaborated that it is better to communicate attractive features of budget priced product offering that fits the niche member expectations. In this regard our competitive /market strategies will begin from our sale promotion. SOURCE: Thomas, Arthur, A., Peteraf, Margaret, A., Gamble, John E, Strickland III, A.J., (2012), Crafting and Executing Strategy, p.96-97; 50; 138-141
  •  Sales promotions directly influence corporate performance by attracting and serving a firm's customers in both economic and psychological ways; Promotions also serves as a point of differentiation that can help a brand stand out in a category -- regardless of product attributes or prices.  SOURCE: PR Newswire [New York] 11 June 2002: Four-Year Research Study Concludes: Sales Promotion Benefit to Consumers and Businesses (http://search.proquest.com.ezp- 00rrw.lirn.net/docview /443992089/13BE53BC3D07BBE0D56/2?accountid=35996)
  •  As part of its sale promotion, Air Mano will commence its flight operations between two city points: Monrovia-Freetown-Monrovia. There will be a one month advertisement in the two mentioned cities regarding the commencement of a regional flight that will fly from Monrovia (Liberia) to Freetown (Sierra Leone), Conakry (Guinea) and Abidjan (Cote d'ivoire). The publicity will be in the print and electronic media as well as several giant billboards will be planted across the two initial cities with photos of the type of aircrafts Air Mano will operate.
  •  The public will be informed about our promotion price. Air Mano flight will be made to fly over each of the two cities for 30 minutes during our launching program. This same approach will be carried out to the other two cities (Conakry and Abidjan). After operating for three months, we will include Guinea by establishing a branch office in Conakry and our route will be Monrovia- Freetown-Conakry-Monrovia. In six months times, we will include the forth city (Abidjan) by also establishing a branch office there.
  •  Finally, our route will be Monrovia-Freetown- Conakry-Monrovia for Mondays, Wednesdays, and Fridays and the other route will be Monrovia- Abidjan-Conakry-Monrovia on Tuesdays and Thursdays. On Saturday our route will be Monrovia-Freetown-Conakry- Abidjan-Monrovia and on Sunday our route will be Monrovia- Abidjan-Conakry- Freetown-Monrovia.
  •  7.2. Basis for Competitive Strategies/Focused Differentiation  Under this theory, Thomas et al, (2012) also advanced that there has to be attribute that appeal specifically to niche members. In this regards we will ensure the following two Ps: price, and place and the five Cs: Consumer, Cost, Communication, and Convenience to appeal to the travelling public: 
  •  7.2.1. Price-The price/ airfare is one main factor in the airline industry that will encourage the public to travel by air. In this regard, we will ensure to maintain a perpetual low fare/price per passenger. Infants (below age 1) as long they don’t occupy a seat in our aircraft, will not be charged a fare. Age 1-12, will be charged the same rate but lower than the fare for age 13 up- ward.
  •  7.2.2. Place-Regarding place of our operation, as mentioned early, Air Mano flight operation will be regional ( West Africa) and the countries involved are Liberia, Sierra Leone, Guinea and Ivory Cost. These countries are the only members of the Mano River Union (MRU). We don’t intend to go beyond.
  •  7.2.3. Consumer-the purpose of our business is to serve the travelling public by air in the Mano River Union countries. We will do everything in our reach to encourage the peoples in these countries to see our service useful to them as not just an alternative for travelling but a save transport.
  •  7.2.4. Cost-The cost for the production of revenue for a targeted profit is a great concern for any investment. Air Mano cannot be an exception to this truism. However, our objective is not to make profit in the short run but in the long run. We intend to establish an air travel hub in this region as a better alternative to land travel. Therefore, we will enjoin on the four MRU Countries’ governments to reduce the taxes on air tickets for this region so that our tickets would be affordable.
  •  7.2.5. Communication-We will convey messages of Air Mano through print and electronic media and by way of gigantic billboards, and community dramas.  7.2.6. Convenience- We will ensure to be on time with our scheduled flights and we will make the travelling public aware and to trust us for this. In the near future, we will purchase a bigger seated aircraft for our passengers’ convenience.
  •  A pro forma income statement is similar to a historical income statement, except it projects the future rather than tracks the past. Pro forma income statements are an important tool for planning future business operations. If the projections predict a downturn in profitability, you can make operational changes such as increasing prices or decreasing costs before these projections become reality.
  •  Pro forma income statements provide an important benchmark or budget for operating a business throughout the year. They can determine whether expenses can be expected to run higher in the first quarter of the year than in the second. They can determine whether or not sales can be expected to be run above average in June. The can determine whether or not your marketing campaigns need an extra boost during the fall months. All in all, they provide you with invaluable information—the sort of information you need in order to make the right choices for your business.
  •  Creating a pro forma income statement for Air Mano  We will begin with the income statement from the current year. For example, it is obvious that each item on that statement will be changed during the coming year and this will enable us to estimate final sales and expenses for the current year to prepare a pro forma income statement for the coming year.
  •  Pro forma gross profit  If we assume that we’re going to expect sales to increase by 10 percent next year, we can safely multiply this year’s sales of ( Say $4,000,000 by 110 percent to get $440,000,000.  Then, in this case, you assume there will be no increase in the cost of each our flight operation or sales of air tickets, and if we need 10 percent more sales in order to achieve your sales goals, we also safely multiply this year’s cost of goods sold (let’s assume a figure of $2,000,000), by 110 percent to get $220, 000,000.
  •  To figure your pro forma gross profit for next year, we can subtract the pro forma cost of goods sold from the pro forma sales. $440,000,000 minus $220,000,000 equals our gross profit, or $220,000,000.
  •  Pro forma total expenses  Let’s assume salaries and other expenses will increase by 5 percent. In that case we will multiply our historical salaries of $20,000,000 and our historical expenses of $1, 000,000 by 105 percent each. Our pro forma salaries for next year will be $21, 000,000 and our pro forma expenses will be $205,000. You then figure your pro forma total expenses by adding pro forma salaries and pro forma other expenses together.
  •  Liberia, Sierra Leone, Guinea and Cote d’Ivoire have individually experienced civil wars (instability) since 1990. There is serious economic meltdown in the region and the force that bond them together (the Mano River Union) has done less to bring any economic cooperation amongst the four countries. The instability caused huge deplorable road conditions in the neighboring countries to Liberia. Business people spent weeks or months commuting from one of the MRU Countries to the next to trade goods and services.
  •  I have intended to establish an airline to be headquartered in Monrovia; establish operational sub offices in the other three countries and to seek shareholders from the four countries to enable us to buy few aircrafts for our air operations in the region.
  •  Finally, we will carry on promotional activities for one month by engaging both the print and electronic media, placing big billboards to advertise our presence and our low prince, and dramatizing on the radio about the importance of air travel as a fast and time saving medium of transport. Air Mano will ensure to maintain a scheduled flight according to the plan advertised and as stipulated in this plan.
  •   ECOWAS International Conference –Two Decades of Peace process in West Africa, Achievements – Failures-Lesson, Monrovia, Liberia 22-26 March 2010) http://www.comm.ecowas.int/dept/h/h1/en/rapport/Final_Report_ Two_Decades_English.pdf  http://www.nationsonline.org/oneworld/africa.htm  http://businesscasestudies.co.uk/business- theory/marketing/marketing-mix-price-place-promotion- product.html  International Crisis Group http://www.crisisgroup.org/en/regions/africa/west-africa.aspx and http://www.acp.int/content/speech-secretary-generals-statement- 26th-session-acp-parliamentary-assembly-18-november-2011  Peter-Donnelly,(2007), Marketing Management, P.283
  •   PR Newswire [New York] 11 June 2002: 1. (Four-Year Research Study Concludes: Sales Promotion Benefit to Consumers and Businesses)http://search.proquest.com.ezp- 00rrw.lirn.net/docview/443992089/13BE53BC3D07BBE0D 56/2?accountid=35996  Southwest Airlines Fact Sheet(http://www.southwest.com/html/about- southwest/history/fact-sheet.html)  Thomas, Arthur, A., Peteraf, Margaret, A., Gamble, John E, Strickland III, A.J., (2012), Crafting and Executing Strategy, p.96-97; 50; 138-141  World pPopulation in 2011 by country(http://www.prb.org/Publications/Datasheets/201 1/world-population-data-sheet.aspx
  • THANK YOU!