The document discusses using the BCG matrix to analyze the competitive environment and positioning of airports, specifically Dubai International Airport. It analyzes Dubai Airport's performance based on three key metrics - passenger traffic, cargo volumes, and aircraft movements - based on ACI annual reports and by applying the BCG matrix. For passenger traffic, the analysis finds Dubai Airport is the market leader with no competitors in the "Stars" category. For cargo, the analysis shows Dubai Airport is in the "Cash Cow" category while Abu Dhabi Airport poses a threat as a "Question Mark". Dubai Airport does not appear in aircraft movement rankings due to factors like its location and airline strategies.
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BCG Matrix Reveals Dubai Airport's Competitive Position
1. By Mohammed Salem Awad - Consultant
Most of aviation companies – airlines and civil aviation authorities looking for
the right strategy to evaluate the competitive environment in the aviation
industry, many tools and techniques are implements - while some of them use
BCG matrix as effective tool to define and develop the right decision, as
supporting, surviving or drawing out of the market, it is also use to define and
reposition the companies / airports in the competitive market.
In the beginning of 1970 BCG – Boston Consulting Group developed different
patterns for working units or the bigger production lines, they developed BCG
matrix addressing GROWTH RATE and MARKET SHARE for different
working units as companies, airlines or airport authorities on a graphic scale,
while airlines/airports try to compare their performance with the others, they
implement open sky policy, facilitated procedures to improve its share in the
region, and consequently it will be easy to compare, analysis and conclude for
positioning the company in competitive environment, and accordingly
decisions are hold and solution are delivered to support the right strategy to
improve the service and performance. So in aviation industry these strategies
reflects the competitive situation for regions and operating routes, usually for
airlines activities in airports, such as Traffic of Dubai Airport that reported by
ACI reports as shown in appendix 1.
Introduction
BCG matrix is the most effective and well known method and tool to manage
and develop decision, it is established based on a production theory.
Taking The lead
Competitive Analysis
Using BCG matrix
Case Study :
DUBAI
Airport
2. At the beginning of seventies BC
group developed and implement
BCG matrix. ,this matrix can be
used to find the priorities for doing a
productivities of unit work. Beside
that and to ensure a long term
performance, company should
secure all the productive units of
high growth rate for the needs of
the money while it is also for low
growth rate of productive units for
the needs of cash flow. BCG matrix
is defined by two parameters:
GROWTH RATE and MARKET
SHARE, and its main concept is, if
there is big market share or high
growth rate, the market will develop
fast. In Air transport and Airline
industry, ICAO, IATA, and others
world countries have to liberate the
skies and offer facilities to attract the traffic to their countries and to their
airports. Thus air transport industry acts as a catalyst for other development
sector like education, Tourism, and hotel investment. It is a part of business
sequence, business connected ring, mostly defined as package. Finally we
have to define the main terms of BCG matrix.
Market Share
The number of passengers should not be necessary to reflect the company
performance compared to other companies for competitive airports. Actually
the change in number of passengers reflects change of market size or in the
economic factors of the region. So the airport performance can be compared
with competitors of neighborhood airports and can also be evaluated by
market share, that airport gains, and it is defined as the market share of that
airport in the region, calculated as follows:
Market Share = (No. of Pax in airport / Total No. of Pax in the region)
Growth Rate
This is the second important factor for the analysis, as it is a significant
element based on historical data of the passengers and same measured as:
Growth Rate for Recent Year =
(No. of Pax of Recent Year - No. of Pax of Previous Year) / No. of Pax of
Previous Year
And can be represented by the Latin letter λ as constant growth factor, which
can fairly be represented by Exponential distribution, so for positive value of λ
it means growth market, while for negative value of λ means declining market
of airport passengers.
3. BCG Matrix
As it is mentioned before, the out-come of
passengers in terms of growth rates and
market share can be located in four mapping
matrix, to define the airport market situation
which are:
1- STARS: High status growth , Bigger
Market Share
2- CASH COW: Low status growth, Bigger
Market Share.
3- DOGS: Low status growth, Small Market
Share.
4- QUESTION MARK: High status growth,
Small Market Share.
DUBAI International Airports (Case Study)
Any airport in the world always explore three main parameters to measure
their performance, these area are traffic passengers, Cargo, and Aircraft
Movements.
1- Traffic Passengers:
According to the ACI Annual
traffic passengers Ranking
Report (2012-2013) for the top
30 leading airports in the
world. Dubai airport ranking at
7th
position in terms of serving
number of passengers. But by
applying the concept of BCG
matrix, the result is different.
Dubai is taking the lead in
the competitive environments,
yes there are many
competitors but most them are
followers. Based on the
outcome of BCG graph, there is threats comes from the region of
question mark ( ? ), That’s 6 airports ( ATL, PEK, LHR, LAX, HND,
ORD.) positioning them self a head of Dubai Airport in terms of
marketing share, so the right action for Dubai Airport is to invest and
attract more business to the region this will create more traffic volume
in region leading to positioning Dubai ahead and these airports will
consequently become followers with the others. Only one airport that a
head of Dubai airport in term of Growth, it is ( KUL ). This positioning
Dubai airport as a Cash Caw airport with respect to KUL. As shown in
figure. The final outcome of BCG matrix, that’s Dubai Airport is the
leader airport in the competitive environment – no single airport
position in the STAR region. That’s mean Dubai Airports is taking the
lead in the global competitive environment.
4. 2- Cargo
In cargo activities, the story is
different, so according to the ACI
Annual Cargo Ranking Report (2012-
2013) for the top 30 leading airports in
the world. Dubai airport ranking at 5th
position in terms of Cargo activity , so
by applying the concept of BCG matrix,
the result will be more clear and Dubai
airport can reposition its situation and
strategy to meet the new challenge in
region ( AUH ) as Abu Dhabi airport has
a rapid growth rate, but small market
share. Here the result is different, HKG
is in Star position, 3 airports in ( ? ) –
MEM, PVG, and ICN while in Cash
Caw, there are 3 airports as AUH, IND, and SZX, with respect to DXB, the
remaining in the list are followers.
3- Aircraft Movements:
Amazing DXB, doesn’t appear in the list ! WHY ?
There are many reasons that DXB doesn’t appear in the list :
First : the location of DXB in the heart of the world. No domestic cities as in
United States and Europe.
Second : the major airlines strategy in the region (Emirates –Etihad) are
concentrated on long-haul operation this leads to high cycle ratio. This factor
acts to reduce the cost for operation.
Third: the business of model for air-taxi is excessively used in United States
and Europe, this add more frequencies for airports.
Summary:
Three parameters can be define the performance of an airports, i.e Traffic
Passengers, Cargo and Aircraft Movements, which mostly collected and
monitored by ACI worldwide, so reading between the lines can describe this
article, we have to look closely for the main factors, factors that expose the
complete picture and define the right strategy to implemented for the top
managements, if we follow the data collection approach by ranking of ACI,
we will position Dubai airports at 7th
position. But if we have analyzed the
data, and implement BCG matrix, the result will be different. Dubai Airport is
the only airport that lead all the airports for passengers while for cargo the
picture is define completely.