Mgt Assignment

1. Topic: PEST analysis and Porter’s five forces
analysis of Biman Bangladesh Airlines Ltd.
Course Name: Principles of Management
Course Code: MGT211
Sec– 05
Submitted to:
Submitted by:
The Brain Messiahs
Name
Ms. Subhat Ehsan (MSE) Lecturer,
BRAC University
Name ID #
Sk. Abdul Alim
Shafkat Hassan
Abdul Momen Usmani
Amir Faiyaz
Raihan Rahman
Nusrat Jahan
16301017
17301222
16301022
16101288
16301201
16103004

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Date of Submission: 14th October – 2018
A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T.
is a short form for the Political, Economic, Social, and Technological factors of the external
macro-environment. Such external factors usually are beyond the firms control and sometimes
present themselves as threats.
POLITICAL FACTORS
In Bangladesh, one can never over-look the political factors which influence each and every
industry existing in the country. It is true that the political interference has to be present
everywhere. Given below are a few of the political factors with respect to the airline industry:
The airline industry is very susceptible to changes in the political environment as it has a
great bearing on the travel habits of its customers. An unstable political environment
causes uncertainty in the minds of the air travelers, regarding travelling to a particular
country. Overall Bangladesh’s recent political environment has been largely unstable due
to controversial election and continued tension with border areas of Bangladesh. Random
riots and the government’s inability to control the situation have also led to an increase in
the instability of the political arena. More riots mean less passengers for Biman and that
is a bad thing. So the airline organization will always want the country to remain stable
politically or it will be adverse business for them.
The most significant international political event has occurred in September 11, 2001.
The event occurring on September had special significance for the airline industry since
airplanes were involved. Recent accidents or incidents of Malaysia Airlines also create a
great impact on airline industry. The immediate results were a huge drop in air traffic due
PEST analysis

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to safety & security concerns of the people. As a result, international airlines are greatly
affected by trade relations that their country has with others. As Bangladesh is a Muslim
country, the 9/11 attack had negative impact on us and also on the airline carrying these
people.
They were checked for illegal possession more frequently over there and it affected their
business adversely as less people were willing to go there by plane.
In Bangladesh, the airlines also suffer from archaic laws applying only to them such as
the retirement age of the pursers and hostesses, the labor regulations which make the
management less flexible in taking decision due to the presence of strong union, and the
heavy control and interference of the government. This affects the quality of the service
delivery and therefore, these airlines have to think of innovative service marketing ideas
to circumvent their problems and compete with the private operators.
ECONOMIC FACTORS
Business cycles have a wide reaching impact on the airline industry. During recession, domestic
airline is considered a luxury and therefore spending on air travel is cut which leads to reduced
prices. During prosperity phase people like to travel in planes and prices increase. But
Bangladesh being a poor country and the as the buying capability of people in general is less,
plane travel is considered a luxury no matter what the economic situation is. So Biman always
has to consider this income standard of people and set ticket price accordingly which can never
be high and out of reach for general people.
Inflation is always a rising problem and inrease in ticket price accordingly may not sit
well with the minimum income people in Bangladesh. So, the high level of inflation is
definitely a thing to worry for Biman in Bangladesh.
After the September 11 incidents, the world economy plunged into global recession due
to the depressed sentiment of consumers. The loss of income for airlines led to higher
operational costs not only due to low demand but also due to higher insurance costs,

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which increased after the WTC (World Trade Center) bombing. This prompted the
industry to lay off employees, which further fuelled the recession as spending decreased
due to the rise in unemployment. Even the carriers was deeply affected as many flights
were cancelled due to internal (employee relations) as well as external problems. This has
also affected Biman indirectly as it meant less business for them and more layoffs. So this
type of unexpected economic crisis can have deep negative effects on the airline industry
and also Biman.
SOCIAL FACTORS
The changing travel habits of people have very wide implications for the airline industry. In a
country like Bangladesh, there are people from varied income groups. The airlines have to
recognize these individuals and should serve them accordingly.
Biman Bangladesh needs to focus on their clientele which are mostly low income clients
and their habits in order to keep them satisfied. The destination, kind of food etc. all has
to be chosen carefully in accordance with the tastes of their major clientele. Especially,
since Bangladesh is a land of extremes, there are people from various religions and castes
and every individual travelling by the airline would expect customization to the greatest
possible extent. For example, since Bangladesh is a Muslim country, they cannot serve
pork which is really popular in western world. They also have to be cautious in serving
beef, since a large portion of Bangladesh people are Hindus. So this type of social
boundaries must be carefully noted and respected by Biman.
For example, South West Airlines occupies a solid position in the minds of the US air
travelers as a reliable and convenient, fun, low fare, and no frills airline. The major
element of its success was the augmented marketing mix which it used very effectively.
What South West did was it made the environment inside the plane very consumer
friendly. The crew neither has any uniform nor does it serve any lavish foods, which
indirectly reduces the costs and makes the consumers feel comfortable.

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So keeping the social factors in mind, Biman Bangladesh has to come up with strategies that will
not test our socially acceptable limits and make profit at the same time.
TECHNOLOGICAL FACTORS
The increasing use of the Internet has provided many opportunities to airlines. For instance, in
India Air Sahara has introduced a service, through the internet wherein the unoccupied seats are
auctioned one week prior to the departure.
Biman Bangladesh has also recently started taking advantage of technological
developments and it now provides many internet based services to its customer such as
online ticket booking, updated flight information and handling of customer complaints.
Other sort of technological breakthroughs like significant increase in internet speeds, new
improved model of planes (means Biman will have the option to provide better planes),
improvement in autopilot system (cut down on pilot costs) etc may have significant
effects on Biman.
Another addition that Biman has put in place is in the ticket purchasing system

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The Airline industry provides a very unique service to its customers. It transports people with a
high level of convenience and efficiency that cannot be provided by any other industry or
substitute. Airline companies pride themselves on the way they treat their customer during the
flight. They have things such as food, drinks, entertainment, and a welcoming staff. The service of
transportation is provided in other industries but the airline surpasses all of them when it comes to
timeliness. The geographic scope of the airline industry is at a global level. Some firms are able to
fly their planes all over the world while others focus on smaller geographic areas. Biman
Bangladesh Airline has both types of flight such as international and national.
According to Porter’s a company can face five types of challenge in an industry. These challenges
are called Porter’s five forces.
BARGAINING POWER OF BUYERS
The airline industry is made up of two groups of buyers. First, there are individual flyers. They
buy plane tickets for a number of reasons that can be personal or business related. This group is
extremely diverse. The second group of buyers; travel agencies and online portals. This buyer
group works as a middle man between the airlines and the flyers and they work with multiple
airline firms in order to give customers the best flight possible
There are low switching costs between airlines because many people choose the flight based on
where they are going and the cost at the time. This is Each customer needs a lot of important
information. They need to know the details of what is provided during the flight. Buyers need to
understand the timing of the flight and the safety aspects of flying in general. The service provided
The Porter’s Five Forces Analysis

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is unique. Some airlines focus on cost, while others focus service quality.
Biman Bangladesh is notable for disruptions to its flight schedule and poor customer service In
2007, Biman faced strong criticism from major international airports including London Heathrow
Airport and Dubai International Airport for its failure to maintain flight schedules. They provide
low quality of service and often face schedule problem. On the other hand, customer switching
cost is low and customer have available other choices. Customer loyalty is low for the Biman
Bangladesh Limited and customer have clear information about Biman Bangladesh poor Financial
condition (they face lose in all year). So the bargaining power of customer is high.
Bargaining power of buyer is High because
service quality is Low
Schedule problem
Safety problem
Poor Financial condition
BARGAINING POWER OF SUPPLIERS
In this case, the major suppliers are the airplane manufacturers. The top two manufacturers in the
world currently are Boeing and Airbus. In this industry the inputs are extremely standardized.
Airline companies only seem to differentiate with amenities. The planes are very similar.
Airline companies cannot easily switch suppliers. Most firms have long term contracts with their
suppliers. Planes are such high capital products that firms probably make long term loan
agreements and have more favorable credit terms when they don’t switch companies. It is difficult
to enter into the plane manufacturing industry because of the capital needed to enter. The amount
of money and expertise needed to make even one plane is around 200 million dollars. For this
reason there are very few suppliers in the airline industry. Airline firms are growing all over the
world and choice of buyer is limited. So the bargaining power of supplier is higher. Biman
Bangladesh Ltd buys the entire plane from Boeing with a favorable long term loan.

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THREAT OF NEW ENTRANTS
Threat of new entrants is another major aspect of the five forces. This aspect has a low threat for
the airline industry. So it presents low threat for Biman Bangladesh Airline also. However, There
are two aspects that do raise the threat level. First, there are extremely low switching costs.
Second, there are no proprietary products or services involved.
Even with these two aspects the industry still has a very low threat overall. Existing firms have a
large cost advantage. This industry requires a large amount of capital and without a strong
customer base there will be little to no profit in the first few years. Existing firms can and will use
their high capital to retaliate against newer firms with whatever means necessary such as lowering
prices and taking a loss
Although there are low switching costs between brands, consumers tend to only chose well-known
names. Airline tickets are expensive so people do not want to give that money to firms they don’t
trust. There is also a huge safety aspect involved and most consumers feel safer with firms that
have been around for a long period of time. This industry requires plane and flying experience
which also lowers the threat of entry. When firms decide to enter the market they first have to
become licensed which can take about a year. After that they are constantly being regulated by
several organizations such as the Federal Aviation Administration and the Department of
Transportation. The time and money spend to solely open an airline company is enough to prevent
most people from entering the industry.
Although Biman Bangladesh committed lose in every year but threat of new entrant is low for
them. The political condition and corruption create new types of restriction to enter in the industry.
THREAT OF SUBSTITUTES
After looking at the threat of entry it is important to also consider the threat of substitutes. This
industry has a high substitute risk level. Consumers of Biman Bangladesh can choose other form
of transportation such as a car, bus, train, or boat to get to their destination. These are cheaper than

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Air ticket in Bangladesh. Switching cost is lower.
Some means of transportation can be more costly than a plane ticket. The main cost is time. Planes
are by far the fastest form of transportation available. Airlines surpass all other forms of
transportation when it comes to cost, convenience, and sometimes service. Consumers do
sometimes choose other methods for various reasons such as cost if they are not traveling very far
which raises the risk. Although Biman Bangladesh Air Line customer pay higher amount of
money but they always face poor quality service, late schedule and safety problem. So the threat of
substitute is higher.
RIVALRY AMONG EXISTING PLAYERS
The last area of the five forces is the rivalry among existing players. The rivalry in the airline
industry in Bangladesh is very intense for many reasons. The industry is currently very stagnant. It
seems to be in the mature stage of the business cycle. The number of competitors stays the same in
the long run and it doesn’t seem to be under or over capacitated. The fixed costs are extremely
high in this industry. This makes it hard to leave the industry because they are probably in long
term loan agreements in order to stay in business. The products involved or the planes are highly
complex which also heightens the competition.
The competition is lessened by the brand identities of different firms. The competition is based on
service and cost. Rivalry of existing players is high in Bangladesh. In Bangladesh Bimini
Bangladesh is the first Air company but nowadays it incurred loss of 545 core money in 2011 to
2012. Because of low quality service and late flight schedule. They continuously lose their
customer. Biman Bangladesh fray is almost similar to their competitor but they provide low
quality service to their customer and delay almost every flight. This is the opportunity of their
competitor. So the threat of rivalry is higher on here.
After looking at the Five Forces Model firms should make dealing with the competition their main
priority.