TABLE OF CONTENTS
I. EXECUTIVE SUMMARY………………………………………………………………….….3
II. EXTERNAL AUDIT
A. Industry Analysis………………………………………………………………….…5
A.1 Economic Forces
A.2 Environmental Forces
A.3 Social, Cultural & Demographic Forces
A.4 Legal, Political & Governmental Forces
A.5 Technological Forces
B. Porter’s Framework………………………………………………………………..12
C. Competitive Profile Matrix (CPM)………………………………………………..16
CPM Analysis
D. External Factor Evaluation (EFE) Matrix………………………………………………………………………………..17
EFE Analysis
III. INTERNAL AUDIT
A. Company Profile……………………………………………………………………18
B. Mission and Vision Statement……………………………………………………19
C. Services Offered……………………………………………………………………20
D. Internal Factor Evaluation (IFE) Matrix………………………………………….22
IFE Analysis
IV. OBJECTIVES………………………………………………………………………………23
V. STRATEGY ANALYSIS
A. TOWS Matrix………………………………………………………………..……..23
Recommended Strategies
B. Internal- External (IE) Matrix………………………………………………………28
IE Analysis
C. Strategic Position Action Evaluation (SPACE) Matrix…………………………28
SPACE Analysis
D. Grand Strategy Matrix (GSM)…………………………………………………….31
GSM Analysis
E. Boston Consulting Group (BCG) Matrix…………………………………………33
BCG Analysis
F. Quantitative Strategic Planning Matrix (QSPM)………………………………..35
QSPM Analysis
VI. STRATEGY RECOMMENDATION
A. Strategic Objectives……………………………………………………………….36
B. Financial Objectives……………………………………………………………….36
C. Recommended Business Strategy………………………………………………37
VII. STRATEGY IMPLEMENTATION
A. External Action Plan…………………………………………………………….…39
B. Internal Action Plan…………………………………………………………….….39
C. Controls……………………………………………………………………………..40
APPENDIX
Cebu Pacific (CEB) is the reigning airline company in the Philippines. It is also one of the cheapest air transports around the world. It offers low fares all year-round which travelers take advantage.
CEB allows everyone to experience many firsts in the industry, innovations such as the e-ticketing and internet booking through www.cebupacificair.com.
Cebu Pacific has two major competitors in the Philippines namely: Philippine Airlines and Zest Air. PAL has the greatest market share because it has more destinations than Cebu Pacific; while on the other hand, Zest Air has the lowest among the three because it has fewer destinations among the two.
Based on the CPM, Philippine Airlines is leading in the market as it got the total score of 2.70. Cebu Pacific’s major advantage is low price offerings, as implemented low fare and still continues to offer promos like Go lite where they offer big discounts on flights internationally and domestically.
The .15 difference indicates that there is a close battle between CEB and PAL for the number one spot.
The internal and external audit performed by the strategists revealed that CEB’s strengths are their maintained low fare; provide new airbuses, partnered with hotels, user friendly website, and more destinations.
Cebu Pacific’s weaknesses are long waiting lines, delayed flights, passenger discrimination, irregular customers, and poor customer service quality.
The opportunities are improvement of tourist spots in the Philippines, widening number of internet users, rising number of foreign students, business globalization and booming accidents in sea transportation.
Lastly, their threats are unstable economy, terrorist threats, increasing oil-price, rivalry within key destination and EU blacklist.
By the IFE Matrix, the factor Poor Customer Service was awarded the heaviest weight because Cebu Pacific is a service company, this should be given a greater prioritization to ensure customer loyalty.
By the EFE Matrix, Cebu Pacific must create new strategies to use those opportunities to adopt more customers and they must have a competitive advantage to be the top airline of choice as competition gets tighter because more airlines are offering the same key destinations as Cebu Pacific. It garnered a total score of 2.95.
After these two matrices, we conducted an IE evaluation was made and the result is CEB must make new strategies which is improving present strategies.
The strategists thus were able to create strategies guided by the matrices like the SPACE, GSM and QSPM which will help CEB reach the objective of the group like increasing their market share and sales after implementation of the proposed strategies. The action plan involve undertakings like marketing, technological advancement and offerings of additional services to help gain and maintain more loyal customers.
II. External Audit
A. Industry Analysis
A.1 Philippine Economy
The economy of the Philippines is the 5th largest economy in South East Asia and has a mixed economic system, and one of the newly industrialized emerging market economies of the world. In 2008, it was ranked as the 36th largest economy in the world by the International Monetary Fund according to purchasing power parity. It is one of the fastest growing economies in Asia, posting a real GDP growth rate of 7.3% in the year 2007. Growth slowed to 4.5% in 2008 as a result of the global financial crisis and in 2009, it grew barely by 1% but the economy weathered the 2008-09 global recession better than its regional peers due to minimal exposure to securities issued by troubled global financial institutions; lower dependence on exports; relatively resilient domestic consumption, supported by large remittances from four-to five-million overseas Filipino workers; and a growing business process outsourcing industry.
A rebound of consumer spending in the Philippine economy 2009 due to continuing increase in remittances by overseas Filipinos as well as timely implementation of monetary and fiscal stimuli prompted the World Bank (WB) to revise upwards its growth forecast for the Philippines to 1.4 percent in 2009 and 3.1 percent next year. Both figures reflect improvements from the lenders’ earlier 0.5 percent and 2.4 percent growth projections for the country for this year and 2010, respectively. Continued deployment of overseas Filipino workers results in the strong inflows of remittances. The World Bank now projects remittance inflows from overseas Filipinos (OFs) to grow by four percent with a net positive impact on the Philippine economy 2009, similar with the projection of the Bangko Sentral ng Pilipinas (BSP), from the previous forecast of four percent contraction. Corporate sectors focusing on the domestic market is showing improved profitability amid the continued slump of the small and medium enterprises involved in exports (http://www.cebu-philippines.net/philippine-economy-2009.html).
In recent years, declining fiscal deficits, tapering debt and debt service ratios, and increased spending on infrastructure and social services bolstered optimism over Philippine economic prospects. Nevertheless, the economy still faces several long term challenges. The Philippines must maintain the reform momentum in order to catch up with regional competitors, boost trade, improve employment opportunities, and alleviate poverty. High government spending to stimulate the economy has created a large budget gap that could limit the government’s ability to address these issues.
A.2 Environmental Impact
Aircraft engines produce emissions that are similar to other emissions resulting from fossil fuel combustion. However, aircraft emissions are unusual in that a significant proportion is emitted at altitude. These emissions give rise to important environmental concerns regarding their global impact and their effect on local air quality at ground level.
A comprehensive assessment concerning aviation’s contribution to global atmospheric problems is contained in the Special Report on Aviation and the Global Atmosphere, which was prepared at ICAO’s (International Civil Aviation Organization) request by the Intergovernmental Panel on Climate Change (IPCC) in collaboration with the Scientific Assessment Panel to the Montreal Protocol on Substances that Deplete the Ozone Layer and was published in 1999. This told us inter alia:
o That aircraft emit gases and particles which alter the atmospheric concentration of greenhouse gases, trigger the formation of condensation trails and may increase cirrus cloudiness, all of which contribute to climate change; and
o That aircraft are estimated to contribute about 3.5 percent of the total radiative forcing (a measure of change in climate) by all human activities and that this percentage, which excludes the effects of possible changes in cirrus clouds, was protected to grow.
The report recognized that the effects of some types of aircraft emissions are well understood, revealed that the effects of others are not, and identified a number of key areas of scientific uncertainty that limit the ability to project aviation impacts on climate and ozone.
Against this background, the ICAO Assembly in 2001 urged States to promote scientific research aimed at addressing the uncertainties identified in this report and requested the council to continue to cooperate closely with the IPCC and other organizations involved in the definition of aviation’s contribution to environmental problems in the atmosphere and the need to take initiatives for a scientific understanding of the problems (Assembly Resolution A35-5 (PDF), Appendix H). This was reiterated by the Assembly in 2007 (Assembly Resolution A36-22 (PDF), Appendix I). ICAO has requested the IPCC to include an update of the main findings of the 1999 report in its Fourth Assessment Report published in 2007.
The new findings related to aviation emissions are inter alia:
o Due to developing scientific knowledge and more recent data estimates of the climate effects of contrails have been lowered and aircraft in 2005 are now estimated to contribute about 3.0% of the total of the anthropogenic radiative forcing by all human activities;
o Total CO2 aviation emissions is approximately 2% of the Global Greenhouse Emissions;
o The amount of CO2 emissions from aviation is expected to grow around 3-4 percent per year; and
o Medium-term mitigation for CO2 emissions from the aviation sector can potentially come from improved fuel efficiency. However, such improvements are expected to only partially offset the growth of CO2 aviation emissions.
In the past, ICAO’s policy-making to address the environmental impact of aircraft engine emissions focused primarily on the ground level effects. In recent years, the scope has been expanded to include the global impact of aircraft engine emissions. In this regard, the Kyoto Protocol (PDF) (1997) to the United Nations Framework Convention on Climate Change (UNFCCC) is of particular importance. The Protocol, which entered into force on 16 February 2005, requires countries listed in Annex I to the Convention (industrialized countries) to reduce their collective emissions of six greenhouse gases, the one most relevant to aviation being carbon dioxide (CO2).
Aircraft are required to meet the engine certification standards adopted by the Council of ICAO. These are contained in Annex 16 – Environmental Protection, Volume II – Aircraft Engine Emissions to the Convention on International Civil Aviation. These were originally designed to respond to concerns regarding air quality in the vicinity of airports. As a consequence, they establish limits for emissions of oxides of nitrogen (NOx), carbon monoxide, unburned hydrocarbons, for a reference landing and take-off (LTO) cycle below 915 meters of altitude (3 000 ft). There are also provisions regarding smoke and vented fuel.
Another concern for the environment is the aircraft noise. Much of ICAO’s effort to address aircraft noise over the past 30 years has been aimed at reducing noise at source. Aero planes and helicopters built today are required to meet the noise certification standards adopted by the Council of ICAO. These are contained in Annex 16 – Environmental Protection, Volume I – Aircraft Noise to the Convention on International Civil Aviation, while practical guidance to certificating authorities on implementation of the technical procedures of Annex 16 is contained in the Environmental Technical Manual on the use of Procedures in the Noise Certification of Aircraft (Doc 9501).
In 2001, the ICAO Assembly endorsed the concept of a “balanced approach” to aircraft noise management. The Assembly in 2007 reaffirmed the “balanced approach” principle and called upon States to recognize ICAO’s role in dealing with the problems of aircraft noise. This consists of identifying the noise problem at an airport and then analyzing the various measures available to reduce noise through the exploration of four principal elements namely, reduction at source (quieter aircraft), land-use planning and management, noise abatement operational procedures and operating restrictions, with the goal of addressing the noise problem in the most cost-effective manner. ICAO has developed policies on each of these elements, as well as on noise charges (http://www.icao.int/icao/en/env/aee.htm).
A.3 Legal, Political, and Governmental
In 1973, form the Letters of Instruction (151 and 151A) the airline industry in the Philippines was monopolized by Philippine Airlines (PAL). The monopoly lasted for more than twenty years until the Executive Order 219 in 1995 which liberalized the airline industry establishing the domestic and international civil aviation liberalization policy in the country. The E.O. 219 stipulates the removal of restrictions on routes and flight frequencies, as well as government control on fares and charges. Following the liberalization, the industry attracted new entrants such as Cebu Pacific, Air Philippines, Grand Air, and Mindanao Express. Unfortunately, Grand Air and Mindanao Express were unsuccessful, and then SEAIR and Asian Spirit come to birth.
Today, airline industry in the Philippines is under the regulations of Department of Transportation and Communication (DOTC) under the civil aviation sector. The Civil Aviation sector is composed of the Manila International Airport Authority (MIAA), Mactan Cebu International Airport Authority (MCIAA), Philippine Aerospace Development Corporation (PADC), Civil Aeronautics Board (CAB) and the Civil Aviation Authority of the Philippines (CAAP) (formerly known as ATO). The department continuously upgrades and improves the international and domestic airport facilities to meet international standards and to provide better service to the commuters. On the other hand, our airline regulatory boards also recognize the International Civil Aviation Organization (ICAO). The ICAO has several regulations that the local boards are following.
Last March 19, 2009, the ISO 9001:2000 Certificate for NAIA Terminal 1 was awarded by the Anglo Japanese American (AJA) Registrars, Inc. after passing the Phase 1 Audit of the Passenger Facilitation Processes. On May 21, 2009, MIAA was given the upgraded ISO 9001:2008 Certification making the Authority and the NAIA Terminal 1 one of the very few institutions in the country that have passed this upgraded level of certification. (http://www.dotc.gov.ph/plansandprograms2010.htm).
Today, airline industry in the Philippines is facing a big issue on international safety standard. Early this year, the European Union banned airlines from Angola and vowed to block carriers from Sudan and the Philippines from starting flights to the 27-country bloc. The European Transport Commissioner Siim Kallas said that they cannot accept airlines fly into the EU if they do not fully comply with international safety standards. The Philippine authorities and airlines made efforts to resolve this issue but still Philippines would be banned from the EU as a precaution.
A.4 Social, Cultural, Demographics
Philippines is archipelagic, separated by water with other countries and is composed of many islands. Filipinos live in immense geographic locations. Depending on distance, options of travel are by land, sea and air.
As the world seems to become borderless and as the concept of globalization is embraced by everyone, airline industry seems to grow. Tourists, foreign students and businessmen travelling around the globe seem to grow also. The most used mode of transportation for long destinations is an airplane. People choose it over other vehicles for its speed, comfortability, and safety that is why most business people choose to travel by air as the business world requires fast pace.
The major passengers or air travelers are those people who love travelling, like inside or outside of the country. Some reasons for travelling include people going home to their respective provinces during holidays and regular seasons; some are having their vacations and some for business purposes.
Travelers tend to choose airlines based on several factors. Price, safety, customer, service, facilities, comfortability and of course its speed are the most wanted in an airline. Some airlines tend to offer promos for cheaper seat price for early booking, tour packages and partners with other establishments. Some passengers avail those promos, others do not. Mostly, air travelers buy tickets in advance.
Today, whether upper class, middle class, or low class people and whether domestic or international air travel, it’s easy to travel given the fact that there are several airlines that offer vast options to choose from.
A.5 Technology
Technology seems to run the globe nowadays. An airline industry is really a field of technology. An airline will be left out by other competitor if not technologically efficient.
A number of technologies that an airline can use in providing services, from its booking, payment, airplanes, and the like. Since today’s world seems to be a paperless economy, transactions tend to be done electronically; airlines can use this technology, e-ticketing, online booking, and even online payment through the use of banks, ATM cards or even credit cards. With the use of internet, by making websites, an airline could be more efficient.
Of course, safety should be also one of the priorities. Airlines should invest on such technology that will improve the safety of their passengers. There are researchers that develop equipment that will improve the safety when in air travel like a company called
Safe which has created an airbag to become one with the seat belt. Airbag is located at the front seat belts and will be out in the event of shock/crash hard. The advantage of an airbag is located in this belt is every aircraft do not need to make massive modifications to implement the airbags in their aircraft, enough to replace the old seat with this one. Barriers are a problem only in the price of one airbag is sold at a price of $1200, compared with ordinary seat belt purchased at a price of only $35.
The other is the Boeing Company and Chorus Motors which have demonstrated a technology that could be lead to a more efficient way of moving airplanes when they are on the ground at airports. Successful tests of an onboard electric motor attached to the nose wheel of Boeing 767 have shown that it may be a viable way of airplanes to move in and around gates, largely eliminating the use of airport tugs and jets engines now serving this purpose, as well as reducing emissions. It provides advanced system solutions and innovative, breakthrough technologies that reduce cycle time and cost while improving the quality and performance of aerospace products and services.
(Source: Previous Cebu Pacific Strategic Plans)
