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Air Berlin

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Nadiya Takabayeva

on 26 November 2014

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Transcript of Air Berlin

Air Berlin
Strategic Management Group Project
Aline Paulus
Assiya Jamalbekova
Jean-Thomas Naudo
Nadiya Takabayeva
Sabina Bedenova
Presentation layout
Company overview
Vision and Mission
External Evaluation
Internal Evaluation
Strategy Formulation
Strategy Implementation

Company Overview
External Evaluation
Company Overview
Internal Evaluation
Financial Analysis
Founded in 1978
Berlin-Tegel Airport
Dusseldorf Airport
Air Berlin
Germany's Second Largest airline in terms of passengers carried
Middle Class/ Business Class
Strategy formulation
Source: Airberlin.com, 2014
Horizontal Analysis
Balance Sheet
Horizontal Analysis
Income Statement
Vertical Analysis
Income Statement
Ratios Analysis
Current Strategies
Turbine program
"comprehensive scheme to ensure that Germany's second largest airline focuses on its key markets on the basis of a stringent business model"
focus on core markets
stringent business model
greater cost efficiency
more customer orientation
stabilization and expansion of competitive position
EUR400 million by the end of 2014
Organizational strategies
Management
Marketing
R & D
MIS
Internal and external computer systems
Communication systems
IT support
IT systems
Vision and Mission

Economic Factors
Demand highly depends on income elasticity , which is directly linked to the global economy: full service airlines are strongly affected by downturn since they rely on high yielding passengers flying first and business class.
Adapting capacity to demand can be an issue due to a difficult trade cycle: delivery time of aircrafts needs to be taken into consideration when properly forecasting and carefully investing in the future
A growing economy can put pressure on the wage expectation of the labour: reducing labor costs during downturn can be a problem in some countries
Increasing oil prices: needed source that makes 10-14% of airline cost
Technological Factors
Technological improvements, such as the rise of the internet: increased the transparency of price levels and bargaining power of customers.
Consumers being dependent on technological devises: new booking features have been and will be introduced.
Environmental Factors
Environmental issues need to be considered: depletion of the ozone layer and the climate change
Adaption to new environmental legislation: aircraft noise regulation and local waste regulation
Natural disasters: volcanic eruptions and the apparition of diseases, such as SARS and Ebola
"Forming the premier league of international air travel through a qualitative and well-recognized brand portfolio"
PESTEL
Activity Map
IFE
Porter's Five Forces
EFE
Political and Legal Factors
Liberalization of the European airline industry: apparition of LCC model, which creates a high competition
Introduction of passenger rights regulation by the EU: overbooking policies, forcing airlines to carefully make use of booking management.
Lawsuits from governmental bodies, passengers:and labor unions.
Political instability of certain countries: changing the route between connection and managing involved insecurity from customers' perceptions.


Social Factors
Changes in the perception of air travel : taking the plane has been made accessible to everyone and customers now expect cheap flights and attractive offers.
A increasingly aging population
Passengers with new travel patterns: seeking more and more for convenient, enhanced and flexible flight experience

Vision
Short
Ambitious
Ambiguous
"We provide and maintain
high standards of our qualitative, attractive and tailored flight products and services
, through our
extensive global route network, central hubs and direct international connections
.
The satisfaction of our targeted customer groups, both
regional and international
, is our main focus
, by offering them
individual booking features and introducing them to our frequent flyer program
.
Air Berlin is constantly seeking for unique growth opportunities
and strengthening its international position by aligning with strategic partners
.
Our goal is to optimize the company's procedures and cost structure in order to be financially successful, which a key factor to position itself against the global competition
. This business model includes a responsible behavior towards Air Berlin's external environment and its stakeholders.
This philosophy is based on the improvement of the corporate ecological footprint, the integrating compliance with

employees

and business partners
, and the
support of charity organizations through internal fund-raising programs
.
Mission
Customers

Products/Services
Markets
Technology
Concerns for survival, growth, profitability
Philosophy
Self-concept
Concern for public image
Concern for employees
CPM
Power of buyers
(HIGH)
Consumers possess a high level of information: comparison of prices through internet portals

Many new options of products: consumers will choose the cheapest offer and therefore dictate the prices (apparition of price wars)
Industry Rivalry

(VERY HIGH)
low growing industry
high fixed cost: monitoring and cutting cost is essential for gaining profit
lack of differentiated products
numerous and equally balanced competitors
Substitutes
(HIGH)
All airline caterers offer the same products: bringing passenger from place A to B.
Customer need is offered by various airlines from increasingly competitive prices
Barriers to entry
(MEDIUM TOHIGH)
Major entry barriers:
High capital requirements
Economies of scale
Limited access to airport slots
Price wars due to predatory pricing
Low profit margins
Few suppliers of fuel, serving other industries and many airlines within the industry
Duopoly of aircraft manufacturer (Boeing and Airbus)
Power of suppliers
HIGH
Full
service
airline
Short-haul, medium-haul and long-haul flights between major regional and international routes
Customer care:
High level of
quality of service
Increased efficient operations
Current Strategies
Etihad
Oneworld alliance
Flat and clear structure
Employee structure:
pilots
cabin crew
technical staff
administration services and other fields
Matching Stage
SWOT Matrix
Space matrix
BCG Matrix
BI, FI,
MP, MD, PD
Industry growing, but low market share
MP, MD, PD,
Divestiture
Ie Matrix
Hold & Maintain strategies
MP & PD
Grand strategy Matrix
Retrenchment
Related Diversification
Unrelated Diversification
Divestiture
Liquidation
matching matrix
QSPM
or
MARKET PENETRATION
PRODUCT DEVELOPMENT
Enhanced marketing towards international markets such as Middle East, Asia, Africa and Australia:
The joint strategic network approach of Air Berlin and Etihad Airways partnership comprising of both airlines flight networks and the frequent flyer programs has been considered as a potential opportunity to succeed. Therefore, the implementation of certain activities should be evaluated
Enhanced marketing towards international markets such as Middle East, Asia, Africa and Australia:
Provision of free Wi-Fi for frequent flyer program members and direct bookings coming from website:
Following the trend of technological growth, the Air Berlin has an opportunity to offer its customers a complimentary Wi-Fi service on board. This strategy will increase the number of frequent flyer program members, along with a promotion of direct bookings through company's website.
Strategy implementation
Decision Stage
On board entertainment
High level of staff skills
Training programs
Frequent Flyer Program Topbonus
Full service airline
Higher prices for long-haul flights
Strong domestic network
Focus on D-A-CH region
Market Penetration
Differentiation
Market Development
Aims and objectives
LONG-TERM OBJECTIVE:
Increase number of passengers by 15% and increase revenue by 14% by 2020 through enhanced marketing strategy
marketing
Finance
Increase the budget for marketing strategies (from €48 million) by 30%.
Increase annual revenue by 2.7% (from €4.1 to €4.2 billion)
Adapt marketing tools and distribution systems to new target markets
Come up with Evaluation Effectiveness system of marketing strategies
Out of €14 million, 40% of the this marketing budget should be spent on the introduction of digital advertising campaign for the designated regions (Middle East region, Asia, Pacific region)
operations
Simplify the online booking process by reducing the number of clicks needed on the company's webpage
HR
Hire 5 additional IT specialists that will be in charge of improving and securing the new website
Higher investment in training programs related to the eco-efficiency strategy
R&D
Increase of R&D budget by 2% to do a marketing intelligence analysis to identify the needs and wants of the targeted customer segment
Policies
Resource allocation
Technological
Laptops for the new IT specialists
Software for the website improvement
Human
5 IT specialists for the improvement and securing the new website
R&D professionals for marketing intelligence training specialized in Middle East, Asia and Pacific Region
Chief project marketing manager will receive bonuses according to the success of the strategy
Physical
New offices for IT specialists located in the headquarter of Berlin, Germany
Conference facilities and training rooms
Financial
The new digital advertising campaign will cost €900,000
Salary for the new IT specialists of 5,000
Training programs will cost from €1,000 to 2,000 per year for each employee
Increase annual revenue by 2.7%
Increase R&D budget
Structure of the company
Project Marketing Manager
Marketing Employee 1
Marketing Employee 2
Marketing Employee 3
Marketing Employee 4
CEO
CFO
CMO
MARKETING DEPARTMENT (ASSIGNED PROJECT MEMBERS)
FUNCTIONAL AREAS
(issues in the department)
Production/operations
Market segmentation
Positioning
Expense budget &
Projected income statement
thank you!
Marketing
Target the international range of customers
Use of social media
Understanding of cultural differences
Finance
Might not cover the costs within a short-term, due to the time required for consumers to recognize the product
The amount of financial assets allocated for the implementation
HR
Additional training for the HR
Set up the objectives and goals that are to be achieved by the employees. Based on this, the motivational systems should be formulated
Proper recruitment and selection
Bonuses and compensations to be provided based on the percentage of the sales increase.
MIS
Due to the increase of the demand and market expansion, the security issues might arise.
Due to the increased number of reservations, the problem with online GDS might arise, resulting in security issues
R&D
Efficient cooperation with marketing to design the marketing campaign beneficially to the company
Current trends and market preferences should be considered
Topbonus
Geographic:
Region: Middle East and Africa, Australia, Asia and Pacific
Density: customers and members of frequent flyer program
Demographic:
Nationality: Arabs and Asian
Income: average
Psychographic:
Social class: business class flyers and leisure economy class
Interest: various
Behavioral:
User status: current and new potential flyers
Attitude towards products: flying is an experience, rather than necessity (high level of service)
Operations:
Ground staff must follow standards (such as using the customer’s name at least one time during the interaction) when checking-in passengers at the airport.
Frequent flyer points earned cannot be exchanged from Air Berlin employees to passengers.
The access of the IT website system needs to be recorded and approved by an authorized person.
Marketing:
Every marketing advertisement needs clearly labeled with an Air Berlin logo, having the right font size, color scheme and font design.
Marketing advertisement need to be ethical and cultural sensitive.
Every marketing campaign content needs to be approved by governmental bodies before introducing them in the national market, avoiding any potential lawsuits.
HR:
IT specialists need to have an MSc degree qualification from a certified university.
Every pilot must go through the fuel efficiency training program.
R&D:
Cabin crew members need to go through a cultural awareness program in order to adapt to geographical changes.
The research and information found through the marketing intelligence analysis need to be kept secure and not shared with the public. Any violation of this policy will cause the termination of the employee without any prior warning.
Every departmental manager needs to stick to its pre-determined budget, unless a prior request is documented in a written format.
Discounted rates given out to corporate employees or customers need to be clearly identified and stated as such.
Finance:
Pop ups in Social Media
Online campaign on YouTube
On board campaign (game with young kids, entertainment)
Flyers to be distributed on the sets
Print advertising on the on-board magazine of Etihad
TV advertising in English speaking channels

Marketing activities
Focus on target audience
Principles of transparent communication, and accordingly, provide information in an objective, comprehensive, and timely manner
Ticket sales, reservation processes, air traffic management, and flight operations. Computers and communication systems are prone to interference, damage, power outages, acts of terrorism, sabotage, computer viruses, fires, and other incidents.
Modern fleet
Synergy with partners
MIS
Turbine program
Eco efficiency program
Optimization
Focused training
Global
network
Baggage transfer
Code share agreements
Hotels portals
Car rental
Extra services
Most of the marketing campaign are in German
Mainly distributed in European countries
Not active in social media
Catering
: increased catering activities will need to be taken into consideration, such as new contracts with catering suppliers or the expansion of the supplier chains in the Middle East, Asia, Africa and Pacific region. It needs to be ensured that the quality and quantity of the meals is standardized.
Distribution channels
: distributions channels might need to be expanded depending on the region of operations. Abacus for instance is a specialized air distributor customized for the Chinese market, using innovative technologies (ETurboNews, 2014).
Maintenance of quality of service
: The quality of the service needs to be maintained regardless the region the airline is operating. Hence standards of operation need to be introduced, applied and monitored.
Schedule of cabin crew staff and pilots
: the schedules of the Air Berlin cabin crew and pilots need to be reviewed and adapted due to the demand in each region.
Slot allocation of planes
: New slots need to be made available in the new regions, therefore contracts with airports need to be made.
The effective implementation of the marketing strategy will have an effect on our operation and process system. The following aspects will be effected:
Systematic expansion though partnership
Negotiations with stakeholders and productivity improvements, as well as with the leasing companies
Timeline
Recommendations
fuel hedging
reduce baggage allowance
reduce staff (cabin crew)
narrow marketing expense
Reduce expense:
Increase market share
Find new sources of investment
Increase charges (booking fees, change-of-plane fees, baggage fees, in-flight amenities fees, paper ticket fees
References
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Airberlin.com. (n.d.). Air Berlin’s service classes. Retrieved from http://www.airberlin.com/en-GB/site/landingpages/serviceclasses.php

Airberlin.com. (2014, 29 August). Airberlin- your airline [Video file]. Posted to Yotube

Air Berlin Group (n.d.). Responsibility. Retrieved from http://www.airberlingroup.com/en/responsibility

Airberlin.com (n.d.). Track record. Retrieved from http://ir.airberlin.com/en/ir/Equity-Story/track-record#Growth through acquisitions

Airfleets.net. (2014). Airline fleet age. Retrieved from http://www.airfleets.net/ageflotte/Lufthansa.htm

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