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  • 1. 2010Lahore Business SchoolZunair, Ahmad, Waqas Ahmad, Javeria, Zafar[Strategic Analysis Of PIA]In this report strategic analysis of PIAC is given and a proposed strategy and implementation is present<br />Strategic Analysis of PIA (Pakistan International Airline)<br />Table of Contents TOC o " 1-3" h z u Overview PAGEREF _Toc261935065 h 4Company Snapshot PAGEREF _Toc261935066 h 5Fleet PAGEREF _Toc261935067 h 6Company in a Glance PAGEREF _Toc261935068 h 6Vision PAGEREF _Toc261935069 h 6Mission Statement analysis PAGEREF _Toc261935070 h 6Business Status PAGEREF _Toc261935071 h 7Offered Services PAGEREF _Toc261935072 h 7Brand marketing through sponsorships PAGEREF _Toc261935073 h 8SWOT Analysis PAGEREF _Toc261935074 h 91)Strengths PAGEREF _Toc261935075 h 92)Weakness PAGEREF _Toc261935076 h 93)Opportunities PAGEREF _Toc261935077 h 104)Threats PAGEREF _Toc261935078 h 10PESTELD Analysis PAGEREF _Toc261935079 h 101)Political Analysis PAGEREF _Toc261935080 h 102)Economic analysis PAGEREF _Toc261935081 h 113)Social analysis PAGEREF _Toc261935082 h 124)Technological analysis PAGEREF _Toc261935083 h 135)Environmental Analysis PAGEREF _Toc261935084 h 146)Legal Analysis PAGEREF _Toc261935085 h 147)Demographic Analysis PAGEREF _Toc261935086 h 15Porter’s five forces analysis PAGEREF _Toc261935087 h 15Bargaining Power of customers PAGEREF _Toc261935088 h 15Bargaining Power of Suppliers PAGEREF _Toc261935089 h 15Threat of Substitute Products PAGEREF _Toc261935090 h 16Threat of New Entrants PAGEREF _Toc261935091 h 16Competitive rivalry in the industry PAGEREF _Toc261935092 h 16Value Chain Analysis PAGEREF _Toc261935093 h 16Primary activities PAGEREF _Toc261935094 h 16Inbound logistics PAGEREF _Toc261935095 h 16Operations PAGEREF _Toc261935096 h 17Marketing and sales PAGEREF _Toc261935097 h 18Service PAGEREF _Toc261935098 h 19Secondary Activities PAGEREF _Toc261935099 h 19Procurement PAGEREF _Toc261935100 h 19Human Resource Management PAGEREF _Toc261935101 h 19Technology PAGEREF _Toc261935102 h 20Infrastructure PAGEREF _Toc261935103 h 20Objectives 2010 PAGEREF _Toc261935104 h 20Financial Objectives PAGEREF _Toc261935105 h 20Strategic Objectives PAGEREF _Toc261935106 h 20Role of Corporate Governance PAGEREF _Toc261935107 h 20Organizational Structure PIAC PAGEREF _Toc261935108 h 20Organizational Structure Lahore Head Office PAGEREF _Toc261935109 h 22Culture PAGEREF _Toc261935110 h 22Leadership and decision making in PIAC PAGEREF _Toc261935111 h 23Delegation Of tasks PAGEREF _Toc261935112 h 24Employee Attitude PAGEREF _Toc261935113 h 24Employee training and attitude enhancement PAGEREF _Toc261935114 h 24Employee satisfaction or dissatisfaction measures PAGEREF _Toc261935115 h 24Violation of Code of Conduct (COC) PAGEREF _Toc261935116 h 24Recruitment and hiring procedures PAGEREF _Toc261935117 h 24Communication pros and cons PAGEREF _Toc261935118 h 25Exit Interviews PAGEREF _Toc261935119 h 25Team work’s role PAGEREF _Toc261935120 h 25Influence of Groups on decision making PAGEREF _Toc261935121 h 25Power and Politics PAGEREF _Toc261935122 h 26Financial Analysis of PIAC PAGEREF _Toc261935123 h 26EPS and DPS graph PAGEREF _Toc261935124 h 26PIAC Key Financial Data PAGEREF _Toc261935125 h 27Important Financial ratios PAGEREF _Toc261935126 h 27Liquidity ratios PAGEREF _Toc261935127 h 27Leverage ratios PAGEREF _Toc261935128 h 28Activity ratios PAGEREF _Toc261935129 h 28Profitability ratios PAGEREF _Toc261935130 h 28Proposed Strategy Stage 2 PAGEREF _Toc261935131 h 30SPACE Matrix PAGEREF _Toc261935132 h 30Y Axis PAGEREF _Toc261935133 h 30FS+ES= -1.14 PAGEREF _Toc261935134 h 30Financial Strength (FS) PAGEREF _Toc261935135 h 30Environmental Stability (ES) PAGEREF _Toc261935136 h 30X Axis PAGEREF _Toc261935137 h 30CA+IS= -0.62 PAGEREF _Toc261935138 h 30Competitive Advantage (CA) PAGEREF _Toc261935139 h 30Industry Strength (IS) PAGEREF _Toc261935140 h 30Defensive Strategies PAGEREF _Toc261935141 h 31BCG Matrix (Boston Consulting group Matrix) PAGEREF _Toc261935142 h 31Domestic PAGEREF _Toc261935143 h 32Foreign PAGEREF _Toc261935144 h 33Analysis Description PAGEREF _Toc261935145 h 33Internal External Matrix (IE Matrix) PAGEREF _Toc261935146 h 34Analysis Description PAGEREF _Toc261935147 h 340Grand Strategy Matrix PAGEREF _Toc261935148 h 34Small Share No Money PAGEREF _Toc261935149 h 34Strong Share or Strong Money PAGEREF _Toc261935150 h 34Strong Share and Strong Money PAGEREF _Toc261935151 h 34Sector Growth High PAGEREF _Toc261935152 h 34Sector Growth Low PAGEREF _Toc261935153 h 34Analysis Description PAGEREF _Toc261935154 h 35Common Strategies PAGEREF _Toc261935155 h 35Proposed Strategy Formulation Stage 3 PAGEREF _Toc261935156 h 35Quantitative Strategy Planning Matrix (QSPM) PAGEREF _Toc261935157 h 35Analysis Description PAGEREF _Toc261935158 h 35Proposed Strategy PAGEREF _Toc261935159 h 36Structure to Strategy match PAGEREF _Toc261935160 h 36Proposed Organizational Tree PAGEREF _Toc261935161 h 37Supporting Organizational Structure PAGEREF _Toc261935162 h 38Key principles PAGEREF _Toc261935163 h 38Implementation and expected outcomes by proposed strategy and structure PAGEREF _Toc261935164 h 40<br />Overview<br />Pakistan International Airlines, Pakistan s national flagship airline, has been a pioneer since its inception in 1955. PIA was the first Pakistani airline from a non-communist country to fly into the People s Republic of China and, in 1962 PIA set out to break the record for the fastest flight between London and Karachi.<br />PIA continues to soar, ever committed to innovation and rich customer experience. With a fleet of young airplanes, a crew dedicated to providing the highest standards of in-house service, and stellar management, POA is a flight that is going places. However, recently, the profitability of PIA has been witnessing a downside.<br />Year 2008 did not bring any significant improvement in the financial performance of PIA. The problems of the past years recurred and compounded to give the company a higher net loss for the year. The company is in a dire situation to salvage itself from further crises. A brief recap of year 2007 reveals that during the year, the company experienced a series of financial, operational and marketing problems. In the early part of the year, imposition of operating restrictions by EU caused considerable disruption in the PIA schedule as well as significant curtailment in capacity.<br />With the airline brand severely dented, PIA lost market share as well as growth in business, which made the situation still more difficult. The unprecedented hike in oil prices adversely impacted PIA s bottom line. PIA, the late starter was unable to hedge the risk against the high oil prices and thus had to absorb the burden of expensive fuel. Apart from the fuel cost, increases in pay to certain categories of personnel and depreciation of the rupee vis-a-vis the US dollar towards the end of the year also adversely affected the financial results.<br />The airline could not remain immune to ever-increasing competition due to an over supplied capacity environment including entry of new operators in certain key markets. PIA managed to increase the yields despite competition. However, this improvement was offset by reduced level of traffic. PIA s revenues, thus, remained static for the year. The cash position of the company remained under strain throughout the year and was managed by short/medium term borrowings from the market based on GOP guarantees. However, a positive development during the last quarter of 2007 was the withdrawal of EU operating restrictions, as PIA was able to satisfactorily address the issues highlighted by the EU Air Safety Committee.<br />Company Snapshot<br />
    • Company Name: Pakistan International Airlines
    • 2. Nature of Business: Airline Service
    • 3. Ticker: PIAC
    • 4. Net Premium Comparison
    • 5. Net Premium CY 07 PRs 70,480,734,000
    • 6. Net Premium CY 08 PRs 89,201,257.000
    • 7. Share Price (Average) PRs 3.17while closing for 2009 was PRs 2.61
    • 8. Market Capitalization: 6,703,472,884
    • 9. Total Loss for 2009 was PRs 5822 million (as of 31st December 2009)
    Fleet<br />Company as of December 2009 had 40 planes in it’s fleet<br />Company in a Glance<br />Vision<br />PIAC has a vision to be a world class airline, meeting customer expectations through excellent services, on-time performance, innovative products and absolute safety<br />Mission Statement analysis<br />PIAC’s mission statement is as follows<br />“Employee teams will contribute towards making PIA a global airline of choice through<br />
    • Offering quality customer services and innovative products
    • 10. Using state-of-the-art technologies
    • 11. Ensuring cost effective measures in procurement and operations
    • 12. Developing safety culture
    This mission statement addresses following core points of nine point mission statement analysis<br />
    • Product and or service
    • 13. Technology
    • 14. Philosophy
    • 15. Self-concept
    • 16. Concern for people
    • 17. Concern for survival growth and profitability
    Business Status<br />PIAC is capitalized (publicized) and it’s the only airline in Pakistan to be in stock market. Though its full privatization is announced by the GOP but it was never implemented due to Union power. Currently 89.1% shares of PIA are with government.<br />Several steps towards outsourcing of non-core business have been initiated. Catering units (starting with Karachi Flight Kitchen), Ground Handling (starting with Ramp Services) and Engineering, are to be gradually carved out of the airline and operated as independent companies.<br />Offered Services<br />Following services are offered by PIAC which are strategically very important for organizations market demand.<br />
    • News Paper and magazines are provided to all customers. The bi monthly “Hamsafar” is quiet popular which was introduced in 1980 and still continues
    • 18. Frequent flyer program allows passengers to receive free tickets, excess baggage vouchers, cabin upgrades, and rewards and special deals. Awards +Plus offers three tiers of membership to frequent flyers - Emerald, Sapphire and Diamond. A+ mile can be earned by flying PIA, and by using the products of PIA's partners.
    • 19. Livery has been with PIAC since its creation. It regularly changes the look of the planes the average aircraft look remains for 3 years approximately. This gives it a new feel to travel in PIA plane. Especially the four tail design has been quiet popular with customers, as it signifies the four provinces of Pakistan.
    • 20. Cargo service is strategically very important even though it was launched in 1970s but in 2003, PIA launched a full courier service and introduced "PIA Speedex". The services were started in Karachi, Lahore and Islamabad, expanding in a year to twelve cities. Today, the airline offers over seventy locations within Pakistan with shipments collected and delivered from customer homes. From 2004 to September 2007 PIA Cargo operated two Airbus A300 Freighter aircraft through MNG Airlines under wetlease/ACMI to Haan and Luton, initially these also operated to Amsterdam, Basel and Cologne. If used properly this can become a winning strike for PIAC.
    PIA maintained its operations to three Continents of North America. Europe and Asia while serving 42 destinations around the world. Contributing from all major routes improved from last year’s level with Pakistan region contributing 26% followed by UK 24%, Middle East 23% America 14%, Europe 8% and Far East 6% only. Pakistan International Airlines Corporation, through its subsidiaries, provides passenger and cargo air transport services. It also offers engineering, baggage, charter, mail and telephone, and handling and related services. In addition, the company operates as a promoter and investor in projects related to construction, development, and operation of hotels, motels, and restaurants; and manages an airport hotel at Karachi. It operates in the United States, Canada, Europe, the Middle East, Africa, and Asia. They can be better understood by the following pie chart<br />Brand marketing through sponsorships<br />PIAC has been using brand marketing quiet efficiently through various sponsorships as described follows. Their use in strategy formulation will be discussed ahead.<br />Pakistan International Airlines (PIA) supports a first-class cricket team that plays in the ABN AMRO Patron's Trophy in Pakistan. PIA is also sponsoring the Pakistani team for the A1 Grand Prix. <br />PIA also promotes the Shandur Polo Gala that takes place every year in the Chitral and Gilgit regions of northern Pakistan during the summer period.<br />PIA is one of the official sponsors of the " Destination Pakistan 2007" festivals.<br />PIA also has its own Boy Scouts Association (PIA-BSA) working in partnership with Pakistan Boy Scouts Association. After the earthquake, PIA-BSA was working in partnership with other charity organisations to provide relief help. <br />PIA Planetariums located in Karachi and Lahore are owned by PIA, which enable the public to see static aircraft as well as astronomy shows. <br />PIA Horticulture, set up in 1996, provides flowers for display in PIA's offices and for a range of events, winning several awards and accolades at flower exhibitions across the country. <br />PIA also supports non-profit organisations within Pakistan such as; Al-Shifa Trust, Zindagi Trust, The Citizens Foundation and Sind Institute of Urology and Transplantation (SIUT). <br />SWOT Analysis<br />Strengths<br />PIAC has following strengths in doing business in Pakistan<br />
    • Monopoly in Pakistan market
    • 21. Huge financial advantage being 89.1% shares with GOP
    • 22. Younger planes as compared to competition
    • 23. Reach to international destinations
    • 24. Brand advantage
    • 25. Experience curve advantage
    • 26. Broader target market
    • 27. Point to point frequency
    Weakness<br />PIAC has following weaknesses<br />
    • Corruption is at level high and lack of accountability
    • 28. High amount of debt
    • 29. Dysfunctional and inefficient organizational structure
    • 30. Uncooperative and non-professional crew
    • 31. Hold of union (Union has higher than average power)
    • 32. Inefficient use of resources (Human and Technological)
    • 33. High influence of Government officials on rules and regulations
    • 34. Offer free travelling to most of government officials, supporters, MPAs, MNAs, and other government guests. (lack of business professionalism in revenue generation)
    • 35. Overstaffing in last 10-12 years
    • 36. Low rewards and appraisal
    • 37. High fares when compared with domestic competitors
    • 38. Low salary of engineers and high salary of pilots (discrimination effect)
    Opportunities<br />PIAC has following opportunities<br />
    • Lowered oil prices
    • 39. Ability to have maximum route and fleet reach
    • 40. Demand for low cost airlines is growing due to global crisis
    • 41. Shifting customer trend to national airline due to racism in various countries
    • 42. Industry recovery for airlines is predicted in couple of years
    • 43. Better recruitment policy
    • 44. Speed ex which is domestic can be international
    • 45. Better training programs
    Threats<br />PIAC would face following threats<br />
    • High interest rate in Pakistan
    • 46. 5 major accidents involving PIA’s planes
    • 47. Technical failures have started growing in planes increasing customer distrust for safety
    • 48. Strong competition by Air Blue
    • 49. Dollar to PRs rate is increasing (money is devaluing)
    • 50. EU is expected to restrict planes from entering air without Euro2 standard emission system.
    • 51. Government may capitalize this sector; in this case their biggest advantage of holding monopoly would end.
    • 52. Fluctuating fuel prices
    • 53. Terrorism
    • 54. Time taken by embassy to accept visa
    • 55. Open sky policy and single euro sky policy
    • 56. High debt can affect its resource purchasing
    PESTELD Analysis<br />Political Analysis<br />Political factors and regulations are most crucial in case of PIAC, the reason it being held by government in major share. Politically Pakistan is a destabilized country, dictatorship and loose democracy are some of the main threats PIA is facing from political factors. Some of the important factors that can have an effect on PIAC are discussed below<br />
    • GOP vs. Judiciary war has proved to be disastrous for our nation and it is expected to go further in near future. This may be a change maker in government. A change in government for PIAC means change of business owners. This can be a bad effect on PIAC. If it happens.
    • 57. Political distress in our neighboring country like Afghanistan has an adverse effect on our international airline industry.
    • 58. Government’s policy to continue support in “war against terror” has increased insecurity level in Pakistan which means fewer visitors come to our country and hence les revenue for PIAC, as its main reliance is on customer revenue.
    • 59. Government has already announced it is going to privatize PIAC if this happens in near future things may look bright.
    • 60. As this is a political government hence higher officials and management are basically supporters of this particular government, if there is a midterm election which would mean a change in government this also mean change in higher management.
    • 61. Defense ministry has already announced its intent on allowing small route planes to travel within cities, this can decrease the customer reach for PIAC.
    • 62. As the above Pie chart shows one of the biggest market of PIAC is Europe and UK (32%) hence current intent of EU to implement standard of euro 2 emission for all flights crossing Europe may make most of PIAC aircrafts useless.
    • 63. Government’s current release of educational barrier for parliamentarians means less educated owners for PIAC hence decreasing its chances for profitability
    • 64. Government’s latest act of outsourcing non-core business issues like catering handling and engineering units as separate companies has proved to be profitable for organization.
    Economic analysis<br />PIAC is mostly dependent on customer revenue; hence economic condition of its target market is very important in its profitability and strategy formulation some of the key developments important to our organization strategically are discussed below.<br />
    • Global crunch has struck hardest on two nations UK and America, as most of the economy of countries like Spain and Switzerland are highly dependent on UK and America’s economy hence they are also badly affected. Now considering the fact that 58% of flights by PIAC are for America, UK and Europe. Means sudden loss in customer base. Hence decreasing revenues.
    • 65. Pakistan’s per capita income has decreased and is expected to decrease even more in coming years hence decreasing consumer’s buying power.
    • 66. Interest rate in Pakistan is very high hence making it hard for investors to invest in PIAC.
    • 67. Pakistan’s stock market is graded at B3 level that means a market risk premium of 14.25, hence decreasing the involvement of capital from stocks.
    • 68. Inflation has decreased from record high 25.3% average in August 2008 to 8.87% in October 2009 and expected inflation this year is expected to go to 11% as revised by IMF after deliver 7.6billion in reserves, which will in turn decrease the buying power of PIAC customer; this is to talk about core inflation. This can have both good and bad effects. The bad part is local travellers would decrease and may go to cheaper travelling with Air Blue. The good part is this will increase the customer travelling to international destinations.
    • 69. The non-food inflation stood at 19.3 percent, against 5.9 percent in the corresponding period of last year. The non-food inflation is also high because of hike in transport group, fuel and lighting group and house rent index. The downward adjustment of petroleum prices in the month of November is neutralized by frequent hikes in electricity and gas prices. Hence the decrease in petrol price is ineffective for PIAC customers.
    • 70. Population below poverty line is expected to go below 23% as measured for 2001 it was 35% of population according to CIA world fact book. This means an increase in customer demand and base.
    • 71. The World Bank (WB) and International Finance Corporation’s flagship report ‘Ease of Doing Business 2010’ ranked Pakistan 85 among 181 countries around the globe, that is very low as compared to other countries, hence decreasing good financers coming to Pakistan.
    • 72. Measured by purchasing power, Pakistan had a 30 million strong middle class in 2005, which according to a latest survey of standard chartered has increased to 35 million, they are the core customers of PIAC hence this indicator is a positive one for us. If we look at upper and upper middle class, it has grown from 6.8 million in 2002 to 17 million in 2010. Hence this also is a good indication if seen with the fact that not many international airlines are present and working from Pakistan.
    Social analysis<br />Socially Pakistan is very diverse and dynamic even though there are many social and cultural changes going on in our country these days as always some of those changes important to PIAC are discussed below<br />
    • There is an explosive elevation in youth’s education level, hence the understandability of services and businesses has grown this in coming years would affect all businesses including PIAC. As the customer becomes more educated he demands that extra mile from its service provider. Aviation falls in service sector hence satisfaction of customers is core competitive advantage.
    • 73. Due to instability in Pakistan more and more people are immigrating to better countries hence PIAC being among three carriers and being monopoly in international travel to Pakistan can benefit from this
    • 74. There is an ever growing number of people for Hajj and Umrah, in last couple of years PIAC has lost in this easy ground as well increasing prices when the petrol prices are lowering purchasing power of customers is decreasing is a fatal move for this type of opportunity. The estimates show an increase of 15% per year in people wanting to go to religious travels. This may be viewed as an opportunity for PIAC, if dealt with properly.
    • 75. Pakistan’s Major population is now in 25-45 years limit hence this being the biggest chunk should be considered most important in strategy formulation. Some of the good things about this is PIAC’s periodic change of look that may be used as an appeal in this respect.
    • 76. As described above major population of Pakistan is in 25-45 years limit. The age of brand development hence this can also be viewed as an opportunity to develop strong brand loyalty for the prospective customers. As in coming years more and more people above this age would perish and new ones would enter.
    • 77. If we observe the level of checking for PIAC customers on international airports, it is fairly visible that travelling on PIAC means an hour wasted in extensive search and verifications. People are more and more connected as compared to yesterday hence this type of news for educated people means bad for the business.
    • 78. Pakistan’s youth is more attracted to entertainment during flight as compared to the previous generation which preferred noisy floor and dirty toilets. Now people demand healthy and tolerable environment.
    Technological analysis<br />In aviation industry technology is what runs the business, this means technology is of key importance in customer retention. Some of the technological changes coming and having effect on PIAC are discussed below.<br />
    • An American firm “Viper Jet” has recently devised a two seater plane for youth equipped with all the gadgets and navigation function along with auto pilot and is available in international market for 12.3 million, that’s like buying a new car for your son. This if viewed with the political factor number 6 increases a threat for PIAC in domestic market in future.
    • 79. GOP is considering reviving Railways, introducing more modern tracks. If this is done then the sole profit taker of PIAC the cargo service called “Speedex” will face a threat.
    • 80. Air blue is currently buying 6 new air busses for its international fleet this will also become a serious threat to PIAC.
    • 81. PIAC currently has planes from Boeing, which is considered as a fuel guzzler when compared with air bus used by air blue.
    • 82. Most of the successful international airlines have gained success through introducing rebate on internet purchases in order to cut down charges on employed agents. This is absent here, though online ticket purchasing is present but they lack giving rebate on those tickets.
    • 83. America is now developing air highways for its domestic users this means PIAC has to purchase new planes to coup with this advancement as well.
    • 84. Introduction of new holographic calling may lead to lower number of people returning to homeland to meet their relatives.
    • 85. In order to meet current trend of people toward emission Laminar Flow is considered a Key to reducing emissions in future aircraft, this technology is due in coming six-seven months.
    • 86. Distributed-aperture electro-optical systems that combine with helmet-mounted displays to allow a pilot to “look through” the airframe, in any direction, to enhance situational awareness when maneuvering navigating at low altitude will advance this year and is considered to be a good solution for safety measure
    Environmental Analysis<br />Environment plays an important role in shaping businesses some of the key factors that may affect PIAC are discussed below<br />
    • The eruption of volcano in Iceland has every one in surprise and has made PIAC’s flights to be delayed, some new advancement in engine is required to make it able to go through that type of ash
    • 87. There has been an increasing distress over global warming and this is clearly shown as discussed above by EU’s intent to restrict the air to emission standards.
    • 88. UK being the top market of PIAC, the environment in UK is rapidly changing for last few years, last winter they hit their lowest degree in 25 years, same was the case with Spain, which observed lest temperature recorded in 32 years. This year is expected same and hence providing PIAC another delay in flights.
    • 89. PIAC high reliability on Boeing has proven to be costly not only to PIA but also to environment as more fuel and more heat is put into our atmosphere.
    Legal Analysis<br />Pakistan is changing rapidly on legal grounds; some of the factors in this change having an impact on strategy of PIAC are discussed below.<br />
    • CAA is expected to legalize personal travelling in air by general public hence proving to be a problem
    • 90. IATA has already warned PIAC on two occasions for its technical failures during flight and once during takeoff, one more failure and according to the law PIAC will be facing fines for its behavior.
    • 91. Introduction and empowerment of Judiciary has given way to “Musabqati commission” which is now closely watching PIAC’s moves.
    • 92. PIAAC is charging 30% on rescheduling and refunding for tickets within 48 hours of flight departure and 50% after departure for both discounted and full fare tickets this is in clear violation of competition commission ordinance Section 3(1), read with section 3(3)(a). And may cause issues in future.
    Demographic Analysis<br />PIA has segmented its target market according to demography hence its immensely important to understand demographical changes in Pakistan before planning for a business here. Some of the key factors regarding demography are as follows<br />
    • Demographic segmentation of PIAC is based on income segmentation, according to the world fact book of CIA the number of people coming to middle class increased hence making an opportunity for PIAC
    • 93. PIAC also has occupational segmentation with his customers. As the “ war against terror is increasing threat to our country and safety, the number of tourist coming to Pakistan are decreasing
    • 94. According to a latest survey the percentage of women in Pakistan is 51% which is slightly higher as compared to men. Hence making an opportunity for PIAC.
    Porter’s five forces analysis<br />Bargaining Power of customers<br />Bargaining power of customers is low in our case due to following reasons<br />
    • PIAC has a monopoly in Pakistan
    • 95. There are only three service providers including PIAC that’s very low competition when compared to other countries
    • 96. Due to current terrorist threats, most of world’s leading airlines have stopped operating from Pakistan.
    • 97. There is only one substitute for air travel that is by sea and most people do not prefer that as it’s pretty time taking
    • 98. PIAC does not distinguish between full fare and discounted fare tickets unlike competitors giving more bargaining power to customers on behalf of its competitors., PIAC charges 50% for rescheduling and refunding after departure of flight which is not in any sense comparable to Air Blue and Shaheen Air charging 2000PRs. This also is a drawback for customers.
    Bargaining Power of Suppliers<br />Bargaining power of suppliers is high in case of PIAC due to following reasons<br />
    • There are only two suppliers of public air travel, Boeing and Airbus.
    • 99. The agents working for PIAC are large in number as compared to other airlines but not many are interested in replacing them
    • 100. Oil companies are already giving fuel on debt to PIAC hence making them strong and reducing our bargaining power against it
    • 101. The operation is mainly dependent on CAA for airports and defense department which set ground rules for every procedure.
    Threat of Substitute Products<br />The threat of substitute products is very little as people are not used to travel by sea and there is no other substitute<br />Threat of New Entrants<br />Threat of new entrant is low based on following reasons<br />
    • PIAC has complete monopoly in major international routes
    • 102. This is a business which requires high starting capital, and slower returns
    • 103. Market in Pakistan is very limited
    • 104. Market in Pakistan in terms of travellers is already saturated to some extent
    • 105. Pakistan ranks on 139th position out of 190 countries based on buying power of people hence making it less attractive for these tertiary level services.
    • 106. Emirate airways which had suspended their flights to Pakistan have again continued it for twice weekly to and from Peshawar, this is to account that in 2006, 07 and 08 emirates total market share in Pakistan was third highest in country when PIAC was leading. Market share was 10.3%. Hence the renewal of this service is a threat to PIAC.
    Competitive rivalry in the industry<br />Competitive rivalry is overall less when seen the whole industry there is a little hint when comparing PIAC with Air Blue.<br />Value Chain Analysis<br />PIAC’s value chain analysis now would give us the idea what are the effects of current strategic position of this organization. To simplify and to understand properly we would divide this section in two parts<br />
    • Primary Activities
    • 107. Secondary activities
    Their description is given below<br />Primary activities<br />Activities which are directly involved in delivering service of PIAC are as follows<br />Inbound logistics<br />Inbound logistics of PIAC are as follows<br />
    • PIAC takes fuel from international suppliers and due to its current debt situation it’s limited to take only fuel it can afford, it has also taken sovereign guarantee of GOP in more than one situations so it is most likely a guarantee may not be useful in near future
    • 108. PIAC has its fleet of 40 airplanes which is something to boast about in Pakistan market.
    • 109. Maintenance of these planes as well as ground checking operations (checking of planes before takeoff) are owned by PIAC itself and very well trained and well equipped
    • 110. In terms of engine renewal and checking facility PIAC has following ground realities the department name is PK-MRO. It has capability to have maintenance as follows.
    • 111. Boeing 747-300 RR RB211 (A, C, and D base checks)
    • 112. Boeing 747-200 CF6/JT9D (A, C and MBC/inter D)
    • 113. Boeing 777 GE90 (A and C)
    • 114. Boeing 737-300 CFM56 (A and C)
    • 115. Airbus A300B4/B2 GE CF6 (A, C, QBC, MBC, and D base check)
    • 116. Airbus A310-300 GE CF6 PW4152 (A, C, MBC, and D base check)
    • 117. ATR 42-500 PW127 (A and C)
    • 118. Having fully functional maintenance facility “PK-MRO” has saved company $20Million in 2009 for not offloading engines to KLM.
    • 119. PIA takes planes mainly from Boeing and currently the fleet is fully capable.
    • 120. Finances to run the company comes from GOP and Profit from operations.
    Operations<br />Following are main operational activities for delivering the service.<br />
    • Now introduced automated dispatch of post flight report
    • 121. Have departure control system (Sabre) on 14 airports and in 2009 extended it to 7 new destinations
    • 122. Enhanced flight monitoring system in comparison to domestic competitors adding to flight processing
    • 123. Currently installed graphical user interface of check in system at major domestic airports (KHI, LHR and ISD) hence improving check in response and shorter passenger queues at check in
    • 124. Centralized load control setup named “SABRE steady state” or “Load Manager” hence load sheets of all domestic and international stations can now be prepared in KHI decreasing processing time (time of service).
    • 125. CLC (central Load control is now working in 16 out of 36 stations this load sheet preparation is done by most domestic competitors by handling agents at certain cost.
    • 126. Superior flight system as discussed above has resulted in better resource utilization and improved flight punctuality (flight delays decreased from 337 in 2008 to 208 in 2009)
    • 127. This has also resulted in improvement of baggage revenue which has been 80 million greater than the target revenue of PRs 1 billion.
    • 128. PIAC has the most advanced simplified and standardized maintenance program.
    • 129. To insure smooth sailing of operation introduced “Lean Six SIGMA” for best practices and techniques in industry.
    • 130. Reduction in material expenses according to 2009 financial report due to these operational practices
    • 131. To drive down operational cost from 2010 June PIAC would use new Boeing 777 by agreement with Thales. It has the capability of full flight simulator. It also has reduced carbon foot prints of device due to this agreement PIAC has been certified by “European Aviation Safety Agency (EASA)-part 145” in accordance with its new rules
    • 132. During Hajj operations PIAC engineering provides one spare B747 at Jeddah for any unforeseen delay hence improving technical reliability which was in 2009 shown at 99.5%
    • 133. In 2009 for distinguished passenger handling and operational techniques Saudi Authorities awarded a shield to PIAC.
    • 134. To improve the practice during Hajj operation now direct flight are sent from major cities hence improving time taken for service.
    • 135. Due to good operational practices PIAC once in 4 years became profitable in operational level as revenue in 2009 went up by 6.4% year on year, yield increased 7.0% in 2009
    Marketing and sales<br />Marketing activities of PIAC have been used to very limited standards. Following are main marketing activities of PIAC.<br />
    • Marketing department is comprised of a very small unit called “SVP Sales” which comes under Manager Director.
    • 136. Most marketing if any is done by advertising in newspapers.
    • 137. PIAC’s main focus of marketing its product is through two main tactics
    • 138. Sponsorship. As described earlier PIAC sponsors a number of teams and groups both for games and social cause.
    • 139. Sales agents. PIAC has a vast network of sales agents who convince people to buy their tickets.
    • 140. PIAC‘s pricing as described earlier is not of much appreciation. It is not only high priced as compared to the utility the consumer gets out of it but also it is against the rules. “Details are given above”. The pricing strategy is done by manager director. Under him “SVP Sales”, “SVP finance”, “Director Finance”, “Deputy managing director”, “SVP IT “and “SVP Monitoring and Appraisal” comes the joint effort of all these departments give PIAC its pricing.
    • 141. PIAC’s recent joint venture with “Pakistan Remittance Initiative” allows customers to send money to Pakistan through legal channel and also win tickets for free in achieving a minimum remittance slab.
    • 142. PIAC frequent flyer program aka “Award+Plus” program has main focus on corporate clients. This is done by decentralizing redemption process. This has not only gathered corporate clients and retained them but also has saved 1.5 million per annum by introducing an in-house online redemption system.
    • 143. Business Plus was another initiative toward corporate client but it has grown old and weak which needs replacement or re-launch.
    Service<br />Service of PIA is done by following activities<br />
    • The pick and drop service of PIAC is pretty fast and reliable it works as a combined department with ticketing.
    • 144. It is coordinating with the help of a central information system PIAC personal (SIS)
    • 145. The kitchen and catering have been privatized as separate bodies
    • 146. The hostesses and stewards are well trained through training programs
    Secondary Activities<br />Activities which whilst they are not directly involved in operations, may increase effectiveness or efficiency of service delivered they are as follows<br />Procurement<br />Procurement activities of PIAC are listed below<br />
    • PIAC purchases in flight amenities, inflight equipment, inflight sales/mail order products, beverages, Wines, spirits along with uniform, office supplies and equipment through open bidding process from private sector.
    • 147. PIAC takes IT products from private organizations again through bidding. It is done by IT department and is responsible for smooth flow of their information system.
    • 148. Engineering supplies department of PIAC is the purchasing authority for procurement of aircraft parts, non-aircraft parts (e.g. simulators or spares) to support aircraft maintenance and operations. This is done through tender notices as well. And it is directly in relation with PKMRO.
    • 149. R&D department is absent as told by management of PIAC
    Human Resource Management<br />Human resource management is done through following activities<br />
    • The distribution of employees is as follows
    • 150. The head office is in Karachi so every operation is done in the head office, but all the regional offices take orders and do their work as assigned by the Head office
    • 151. The decision making is done at higher level of organization. The detail will be discussed ahead in the role of corporate governance
    • 152. Motivation has always been there for the employees since day one in the form of handsome salary and bonuses along with steady and hefty increments. But due to crisis this has been on a slow basis for some time.
    Technology<br />As discussed earlier PIAC is one of those Pakistani companies which do not implement strict and focused R&D departments hence technology is least of the worries for PIAC.<br />Infrastructure<br />The infrastructure of PIAC is geo divisional. The main control body as defined earlier is head office in Karachi, which controls all other departments and offices. The detail of how it works will be ahead.<br />Objectives 2010<br />On January 15 2010, the 323rd BOD meeting was held to define strategic and financial objectives for this year they are as follows<br />Financial Objectives<br />The board approved Corporate Budget for the year 2010 with a revenue target of Rs114 billion that is more than 20 percent higher as compared to the unaudited revenues of 2009<br />Strategic Objectives<br />To achieve the above revenue following strategic objectives were given<br />
    • Introduction of new /additional flights, real time Pax Revenue Management System
    • 153. Introduction and success of Pakistan Remittance Initiative (PRI)
    • 154. Increasing market share by 5%
    • 155. Successful monitoring of routes
    In this meeting according to the management of PIAC cost cutting measures including debt swap, fuel price hedging, review of contracts, aeronautical charges and ATR fleet economics were discussed in details.<br />Role of Corporate Governance<br />Organizational Structure PIAC<br />The organization’s hierarch of department is as follows it also shows the chain of information flow<br />The diagram above clearly indicates a closed or mechanistic culture of this organization<br />Organizational Structure Lahore Head Office<br />When we see the Lahore head office organizational structure the picture becomes clearer it is as follows<br />As we can see the district manager is in control and directly taking information as well as giving order to each and every department showing autocratic leadership style followed in PIAC.<br />Culture<br />The seven characteristics of organizational culture in PIAC are given below<br />CHARACTERISTICSPIAINNOVATION AND RISK TAKINGLowATTENTION TO DETAILLowOUTCOME ORIENTATIONHighPEOPLE ORIENTATIONLowTEAM ORIENTATIONHighAGGRESSIVENESSLowSTABILITYHigh<br />The results show that PIAC focuses more on the goal rather than means to achieve it. Therefore, employees are not highly valued in PIAC. The characteristics and values form the organizational structure which determines the behaviour of employees and the effectiveness of the organization are<br />Leadership and decision making in PIAC<br />A public organization, PIA, has an autocratic style of leadership. The decisions are made by the top level management without involving their employees. These decisions are primarily policy-based decisions like the purchase of new planes, replacement of new fleets and changes in the fares of tickets.<br />Delegation Of tasks<br />Delegation of authority is limited due to the centralized structure of PIA. The authorities reserve the right to make decisions in interim board meetings. The middle level management is not even allowed to speak for or against the top level management or to give any type of interviews.<br />Employee Attitude<br />At PIA, every employee is expected to show complete responsibility through their attitudes and avoid behavior which clashes directly with the organization’s interest. In case of deviant workplace behavior, administrative action is taken against the employee according to the standing rules of PIA.<br />All human resource issues are dealt in accordance with the POLICIES AND PROCEDURES MANUAL (Volume 1 and 2). This document deals with every aspect of employee behavior.<br />Employee training and attitude enhancement<br />A PIA Training Center (PTC), operating in Karachi, conducts training courses to augment the skills of employees while the scope for enhancing their attitudes (beliefs and emotions) through these courses is meager.<br />Employee satisfaction or dissatisfaction measures<br />If PIA believes that dissatisfaction or absenteeism is affecting the productivity level of employees, then the root cause of such factors is identified. If a genuine reason emerges, the employee is assisted in rectifying the situation; if not, then the employee might get a letter of warning.<br />Employees at PIA can express dissatisfaction through the ‘Suggestion Boxes’ located at various sites of PIA. Furthermore, quarterly employee co-ordination meetings are held where all employees can share their views with their bosses and subordinates.<br />Violation of Code of Conduct (COC)<br />If the code of conduct is violated in PIA, a ‘Show Cause Letter’ is issued while in severe cases the employee is suspended until a proper investigation takes place. <br />Recruitment and hiring procedures<br />An entire Recruitment and Selection Division is functioning in the HR & Administration Department. Decisions are taken by the top management of PIA regarding the attributes required for hiring. An assessment form, based on certain characteristics such as personality, skills and qualifications, is used to evaluate a candidate. The verdict of the management is forwarded to the recruitment division which then initiates the procedure of recruitment and selection.<br />After difficult circumstances the Human Resource Department is now fully functional and policies and procedures are now in place. New recruitments with clearly defined levels of skill and competence in all areas are being made. New inductions both on the management side and specifically the operational side of cockpit crew, cabin crew and ground engineers will continue at regular intervals so that the shortages experienced in these areas are fully taken care. The policy is to promote people from within the airline at all levels. However, where PIA does not find the relevant competencies they hire people from outside which is based on market salaries. Salaries of all the employees including operational crew have been considerably enhanced in an effort to align PIA salaries with regional airlines over a period of time.<br />Communication pros and cons<br />The organizational structure of PIA is centralized, therefore decision-making is a time-consuming process and delays occur in downward communication. Though, it is believed that the current Chairman is inclined towards a decentralized system, the effectiveness of such an approach in PIA remains to be seen.<br />Effective communication is essential in all organizations and it becomes even more essential in an organization like PIA due to its large size and expanded network. It is necessary that people from various departments communicate between each other to have an overall uniformity. Previously fax was widely used to transmit information, however, with the technological advancement e-mails are used for this purpose. Another mode of communication is through letters.<br />Exit Interviews<br />At PIA, exit interviews depend on the immediate supervisors and Departmental Heads. Some of them are keen on the idea, others are not: there is no clear policy for exit interviews.<br />During downsizing employees are offered different packages such as a ‘Golden Hand Shake’ in which employees are paid a lump sum amount for their services. This is done to maintain a healthy relationship between the management and the employees and also to make employees feel that they are being taken care of in the organization.<br />Team work’s role<br />In an airline industry almost all tasks are performed through team work and PIA is not any different. From ticket reservation to the landing of the plane team work is the decisive factor. Employees work in various teams such as ground staff, cabin crew, flight attendants, office staff etc. All these teams have different sets of tasks to perform but cohesion among these teams is necessary to run the day to day operations. Considering the diverse nature of employees PIA has, it is difficult to make team work efficient so it is major challenge for them.<br />Influence of Groups on decision making<br />The sheer size of the organization leads to the formulation of various formal and informal groups at PIA. The informal groups influence the overall decision making process to some extent due to the nature of the workplace. These informal groups are formed because many employees have been there in the organization for several years and they share common interests.<br />One more important factor is the highly politicized environment of the organization which allows and pampers such groups from top level management.<br />Power and Politics<br />In PIA employees are less empowered which means all the power rests with the top level management and they can exercise it at their will. Also their power cannot be challenged by the employees and compliance to the decisions being made by them is essential. We can also say that in PIA that legitimate power is exercised. This also leads to high employee dissatisfaction because in order to be influential one needs to have personal contacts. This is the reason employees focus more on networking rather than concentrating on their jobs. We were not able to get an insight on the various political issues in the organization but it is a common observation that illegitimate political behavior is a common practice. It is present in the form of nepotism, intentionally damaging the image of other employees.<br />Financial Analysis of PIAC<br />The financial analysis of PIAC is as follows<br />EPS and DPS graph<br />The price of the share is taken on Y Axis and on X Axis timeline is taken. This graph shows the EPS and DPS of PIAC in past 5 years<br />Current Price (4/30/2010)=2.88PKR<br />PIAC Key Financial Data<br />Ticker: PIAACountry: PAKISTANExchanges:KARMajor Industry:Transportation  Sub Industry:Airlines2009 Sales103,250,358,000(Year Ending Jan 2010).Employees:18,036Currency:Pakistan RupeesMarket Cap:6,704,742,482Fiscal Yr. Ends:DecemberShares Outstanding:2,328,035,584Share Type: A ShareClosely Held Shares:1,877,656,017<br />Important Financial ratios<br />Liquidity ratios<br />Net working capital (to fulfill short term obligations)<br />= current assets –current liabilities<br />=16,880,558-68,817,616<br />=51937058<br />Current ratio<br />= current assets/current liabilities<br />= 16880558/68817616<br />= 0.2452<br />Quick Ratio<br />= (cash equivalent + short term investment + accounts receivable)/current liabilities<br />= (16880558-3987423)/6887616<br />= 1.8719<br />Cash ratio<br />= (Cash + Cash equivalent)/Current Liabilities<br />= 742945/16880558<br />= 0.044<br />Leverage ratios<br />Debt to total assets<br />=total liabilities| total assets<br />=180,786,020|160,013,178<br />=1.12982<br />Debt to equity ratio<br />=total liabilities| total stock holders’ equity<br />=180,786,020|49,054,745<br />=3.685393<br />Activity ratios<br />Fixed asset turnover<br />=Sales| fixed assets<br />=94,563,765|143,132,620<br />=0.660672<br />Total assets turnover<br />=sales| total assets<br />=94,563,765|160,013,178<br />=0.590975<br />Profitability ratios<br />Gross profit margin<br />=Gross profit | sales<br />=15,934,338|94,563,765<br />=0.168504<br />Operating profit margin<br />=EBIT| sales<br />= 13,308,764| 94,563,765<br />= 0.14074<br />Net profit and loss margin<br />=net income | sales<br />= 5,822,431| 94,563,765<br />= 0.06157<br />Return on total assets (ROI)<br />=net income or loss| total assets<br />= 5,822,431| 160,013,178<br />= 0.03639<br />Return on equity (ROE)<br />=net income| total stock holders’ equity<br />= 5,822,431 |49,054,745<br />= 0.11869<br />Proposed Strategy Stage 2<br />SPACE Matrix<br />
    • Internal Strategic PositionExternal Strategic PositionY AxisFS+ES= -1.14Financial Strength (FS)ROI =+1ROE=+1Profitability Ratios=+2Activity ratios=+3Leverage Ratios=+1Liquidity Ratio=+2Average= +1.66Environmental Stability (ES)Barriers to entry=-1Inflation=-5Technology change=-3Competitive pressure=-4Demand variability=-1Average= -2.8X AxisCA+IS= -0.62Competitive Advantage (CA)Market Share=2Customer Loyalty=-1Direct Flight (point to point)=-1Huge and Young Fleet=-2Service Quality =-3Management Experience (Professionalism)=-5Average = -2.33Industry Strength (IS)Growth Potential= +3Market Entry= +1Technology Knowhow= +2Financial Stability= +2Fuel Price Stability= +1Human resource availability=+2Government Support=+1Average= 1.71
    ConservativeDefensiveCompetitiveAggressive+1+2+3+4+5+6-1-2-3-4-5-6+2+4+6-2-4-6(-0.62,-1.14) 3.00)ConservativeDefensiveCompetitiveAggressive+1+2+3+4+5+6-1-2-3-4-5-6+2+4+6-2-4-6(-0.62,-1.14) 3.00)<br />The graph indicates the PIAC to be in Third Quadrant which is defensive strategy quadrant<br />Defensive Strategies<br />In the defensive quadrant the company may use one of the following strategies rectifying internal weaknesses and avoiding external threats. Defensive strategies include retrenchment, divestiture, liquidation, and concentric diversification.<br />BCG Matrix (Boston Consulting group Matrix)<br />PIAC is the only SBU PIAC has it has an international share of 38.04% (projection based on last year’s increase or decrease in share) making it a benchmark in its industry in relation to Pakistan. Domestically the market share is 74.61(projection based on last year’s increase or decrease in share) making it a cash cow.<br />Domestic<br />SBURevenueRevenue%ProfitProfit%Relative MSGrowth ratePIAC94,563,765100(5,822,431)100%100%-0.01<br />1651093980-595223137436Market Growth00Market Growth30451253789750030019321797997001777704327025001733909184546600508019792958255227584010160261556550801210945825581851510795493395533595382478047145519074504128135908050355854090805065468593980011811009398017938759398023890989398030019929430386251569420<br />17145147320PIAC00PIAC<br />13779546355Relative Market Share0Relative Market Share<br />Foreign<br />SBURevenueRevenue%ProfitProfit%Relative MSGrowth ratePIAC94,563,765100(5,822,431)100%100%-0.05<br />16510939800-595223137436Market Growth00Market Growth30451253789750030019321797997001777704327025001733909184546600508019792958255227584010160261556550801210945825581851510795493395533595382478047145519074504128135908050355854090805065468593980011811009398017938759398023890989398030019929430386251569420<br />8518117415PIAC00PIAC<br />13779546355Relative Market Share0Relative Market Share<br />Analysis Description<br />The company lies in both cases in cash cow but according to “Strategic management: concepts and cases, / tenth edition By Fred R. David” if the company’s growth rate is too slow and productivity is declining then the best way to solve the problem may be in retrenchment or divestiture. In some cases when the portfolio is strong then we can opt for diversification.<br />Internal External Matrix (IE Matrix)<br />The IE matrix of PIAC is as follows<br />Analysis Description<br />The above diagram indicates that PIAC lies in the middle order of “HOLD and MAINTAIN”. In this type of situation the company may either use “market penetration” or “product development”. In the case of PIAC we see the market penetration is not of much use hence product development in the form a visible and distinctive brand identity may be taken in mind. Here product may very well be in the form of PIAC as a pure Pakistani Brand Airline.<br />0Grand Strategy Matrix<br />Small Share No MoneyStrong Share or Strong MoneyStrong Share and Strong MoneySector Growth HighSector Growth Low245230195892PIACPIAC<br />Analysis Description<br />PIAC’s Domestic and International share is highest in the market but the growth in this sector in couple of last years is negative. One main important point to ponder is PIAC has financial problems these days because of debt. In this type of situation as the diagram above indicates you have the opportunity of strategies likes the following<br />
    • Cost Reduction
    • 156. Add related products and services for existing customers
    • 157. Add new products and services for new customer base
    • 158. Underserved Niche (very small)
    • 159. Market domination
    • 160. Strategic partnership
    • 161. Joint ventures
    Common Strategies<br />The most common strategies from above analysis have been<br />
    • Cost reduction through “retrenchment” or “divestiture”
    • 162. Product development through “ concentric diversification”
    • 163. For this purpose joint venture may be used
    We will further analyze them in the stage 3 of proposed strategy formulation<br />Proposed Strategy Formulation Stage 3<br />Quantitative Strategy Planning Matrix (QSPM)<br />Analysis Description<br />The QSPM clearly tells that cost reduction is the most important and first thing to do in this type of environment cost reduction may be done in one or more than one following areas, which ever suites best<br />
    • raw material procurement
    • 164. logistics - inbound and outbound
    • 165. production ( process ,time and work study, maintenance ,automation)
    • 166. energy
    • 167. human resource ( out sourcing )
    • 168. sales & marketing
    • 169. finance
    Raw material procurement is almost impossible in current financial condition of PIAC; no doubt PIAC is already working on production in its case deliverance of service, Human Resource Management Is the focus point of all the problem as far as the analysis (SWOT) goes. Sales and marketing have already been started to develop to automation and e ticketing compromising <br />Proposed Strategy<br />We propose the retrenchment strategy or turnaround strategy by the help of rightsizing. <br />Our main goal is to go through a temporary belt-tightening, which will allow the firm to pursue a growth strategy at some future point<br />Structure to Strategy match<br />This topic may be considered most important in this analysis and report. The structure of organization is very important in creating resonance between people and profits. Higher benefits in form of huge profits and above average returns are only for organizations which have structures according to their strategies<br />“Main problem of PIAC is the fact that it is not adaptable in nature when it comes to change. This is to exclude image on logo or fleet. This is greater than this this is to consider that every strategy comes with its own proposed structure”<br />Proposed Organizational Tree<br />Our proposed strategy is to cut down cost by rightsizing strategy in which we try to lay off our extra burdens in term of termination of employees who ever is involved in “triads”, in this way try to break that chain down. Guerilla warfare may also be used to break down these people and groups trying to influence decisions.<br />174092178740Professional Core• Qualified professionals, technicians, managers• They own the organizational knowledge; hard to replace• Task culture• Number of people decrease0Professional Core• Qualified professionals, technicians, managers• They own the organizational knowledge; hard to replace• Task culture• Number of people decrease<br />left5135604Results from shamrock organizationMore than decentralized organizationSmall center, no direct control over otherKey Principles: Traditional organization, Inverted Doughnut, 0Results from shamrock organizationMore than decentralized organizationSmall center, no direct control over otherKey Principles: Traditional organization, Inverted Doughnut, -164592024466550-16459201691005027108151691005026636872542181036010851631315Contractual Fringe• Takes on increasingly larger proportion of work• Example: advertising,Research, computing, catering are done outside the organization by agencies• pay for output, not for input0Contractual Fringe• Takes on increasingly larger proportion of work• Example: advertising,Research, computing, catering are done outside the organization by agencies• pay for output, not for input27113951690260-3097691619278Flexible Labor Force• Part-time and temporary workers (fast growing)• Role culture• Employees’ treatment influences their outputFlexible Labor Force• Part-time and temporary workers (fast growing)• Role culture• Employees’ treatment influences their output<br />Supporting Organizational Structure<br />For the above explained shamrock organization tree we have suggested following organizational structure<br />Key principles<br />In defining we would take following key principles<br />
    • Peters’ and waterman’s eight “excellent” attributes
    • 170. A hybrid custom designed structure which is a mixture of mechanistic and organic model of organization
    • 171. The 3 rules for conquering complexity
    • 172. Introducing “fun” element in operations and work environment
    • 173. Person does best when he is doing what he is made for or he believes so
    • 174. Departments remain the same
    • 175. Our structure will only define approach and factors on those departments
    • 176. Distribution of power will be discussed
    • 177. We would try to decrease the turnaround time with our approach in order to increase efficiency and service quality
    6273082214685006575729222637004898003-286247“Corporate Planning” Team Project 5 a“Corporate Planning” Team Project 5 a<br />398360345333Project 5 “Corporate Development” Team0Project 5 “Corporate Development” Team-8001045085Project 1 “H.R.” Team00Project 1 “H.R.” Team<br />-6917632389530-699715238952<br />279090999253001208405990600<br />585978012700019551658255Board of Directors00Board of Directors<br />-691763250742005208104171229“PEC” Team Project 5 b0“PEC” Team Project 5 b<br />26080001768070298132517780001089329177800-175895113030Project 2 “Finance” Team00Project 2 “Finance” Team4093845112395Project 3 “Marketing” Team00Project 3 “Marketing” Team<br />551815000-6997151273590<br />1923415208915Project 4 “Flight Operations” Team00Project 4 “Flight Operations” Team<br />3880237315816“PK-MRO” Internal & External Profits“PK-MRO” Internal & External Profits<br />-691763215237056931352152370<br />483400721802600372916221802600<br />4364990300355“PK-MRO” Project Team Project 6“PK-MRO” Project Team Project 6<br />56931352162870<br />87464115708Catering Team Internal Operations Project 4bCatering Team Internal Operations Project 4b2608028147513“PK-MRO” internal Team Project 4a“PK-MRO” internal Team Project 4a<br />381663656260037768714972300<br />1922891296545Communications Team Managing SISCommunications Team Managing SIS<br />37439602990850371030519304000171397619265300-692096299913<br />Implementation and expected outcomes by proposed strategy and structure<br />Our proposed structure is in accordance with our strategy implementation according to following table<br />Challenges for PIACEffect of proposed strategyEffect of proposed structureCorruptionRight sizing will decrease people size and increase transparencyIf every department is in contact there is a less chance of un necessary expenditureHigh Amount of debtReducing size and increasing efficiency will increase profitsReduced size will be justified by team work (2 and 2 makes 22)Dysfunctional and inefficient structureReducing size of employees will allow company to smoothly change its structure according to needStructure was inefficient because it had one channel for downward communication this is now countered with introduction of SISUncooperative and nonprofessional crewReducing size by eliminating politics players and lazy workers will do the charm, introduction of projects or task oriented work will increase efficiency and customer value as wellThe structure proposed in organizational tree clearly indicates a large number of contractual employees who are project and task basedHold Of UnionSame as AboveThe unions are made mostly by people who have been working in an organization for 5+ years because they develop related causes and benefits but introduction of output pay will make employees realize they are going to be paid for what they doHigh Influence of Government Officials on rules and regulationsIf power is not delegated easily this strategy will snatch the power back to the company and employeesIntroduction of teams on basis of project will increase mutual understanding about work and decrease related benefits of employees “use of cyclic teams is recommendedInefficient use of resourcesThe strategy in itself tells if someone is not utilizing the resources properly he should be terminated in the name of structural change and cost reductionThe proposed structure gives more room to transparency as originalFree travelling by Government officialsThis is an issue which can only be resolved after resolving all others because it needs employee understanding that company we are working for is ours which is absent nowSame as left blockoverstaffingProbably the biggest issue and mother of all evil this can only be eliminated by using proposed strategyUsing teams instead of departments will make the problem disappear because in this way only necessary people will be hiredLow rewards and appraisalAfter reducing cost benefits must be shared with customers to gain a brand resonanceOnce the company gets out of its current problems the teams will themselves behave as entities to give new ideas on their frontsHigh fares in domestic marketSame as aboveSame as aboveSalary discriminationThe use of output based teams will eliminate the issue of discrimination and introduce a new culture of competitive environment within the companyThe teams defined in structure will allow the people to work as groups and give outputs as groups and also to suffer problems as groups increasing their interest in job and decreasing their interest in leg pulling<br />Hence we can safely say that there is a match between Structure and Strategy<br />Strategy to skill and management style match<br />The skill of the people working with PIAC is very important in implementing the proposed strategy. Basic skills we recommend for this strategy are as follows<br />This diagram breaks down skills in three categories<br />
    • Top level management
    • 178. Middle level management
    • 179. Functional level management
    Strategy to Shared Value and System Match<br />Shared values recommended by us for the implementation of this strategy proposed is the Belief Model for Leadership as explained under<br />Proposed Belief Model<br />Ability<br />
    • Leadership of a profitable business
    • 180. Ability to execute and implement change
    External Behavior<br />
    • Practice Future Scenario Planning
    • 181. Move fast and change faster
    • 182. Find Humor In Tense Moments
    • 183. Think Logically and in benefit of internal people and customers
    • 184. Celebrate everything
    • 185. Quick respond to feedback
    • 186. Take the competition seriously but not yourself
    • 187. Publish employee newsletter with stories and information
    Emotions (Sustained)<br />Emotions (Transitory)<br />
    • Compassion and Humility
    Testing Of Proposed Model<br />We can test the effectiveness of this proposed belief model by following measures<br />
    • We can test the communication flow
    • 196. If the proposed model is implemented properly the information flow down and up will be open and efficient
    • 197. If the proposed model is not implemented properly the information levels will not be open, in this case find out why and where communication is blocked
    • 198. Test through sigh sound and feel that system being used is stable and suitable for the required tasks. The model proposed is self-sustainable due to the introduction of “change” and may be modified to tailor according to task. If values are not working at all align the system to proposed model properly.
    Strategy Evaluation<br />The proposed strategy should be evaluated twice a year using balance score card and if change is necessary the situation must be viewed with De Bono’s six thinking hats in the following order<br />Blue, Red, White, Yellow, Black, Green, Red, Blue<br />Following balance score card is proposed for the evaluation<br />