Posted at 11.30.2018
This statement will discuss this content of business strategies utilized by Lion Air and exactly how it gains both the national and international position in the airline market. The record includes and discusses their strategic choice in order to get competitive advantages over rivals. On this sense, current international strategies will be talked about into three tactical categories, international strategy, global strategy and differentiation strategy. In addition, Lion Air's value string will be examined to recognize the habits of the organization's activities.
This newspaper also provides perception into how Lion Air's strategies have been developed, by indentifying the Lion Air's corporate value, notably corporate missions, visions and aims in the form of strategy authority as value. Furthermore, this survey will discuss the strategic development process by separating into two categories, designed strategy development and emergent strategy development, though they aren't mutual exclusive.
This newspaper will measure the Lion Air's strategy pushes on suitability of strategy. Foundation on the earlier evaluation of PESTEL construction, Porter's 5 forces model and core competency to judge the suitability of the Lion Air's strategy.
The choice of international strategy will depend mainly on the exterior environment and organizational capacities. Moreover, advancements in international regulation and good governance resulted in a conducive politics environment and appearing economy. Because of this, there is also an incremental demand in rising global market segments. Furthermore, most competition of Lion Air are controlled worldwide and be competitive each other to get market shares. Therefore, each one of these factors lead Lion Air to develop its international strategy to Global strategy. The followings are the strategies utilized by Lion Air.
The global strategy is the strategic guide towards globalization. Additionally, it is signify the international strategy with the broaden opportunity of business activites that allocated geographically worldwide. The competitive benefit of location, labor cost and federal regulation play an important role, therefore product offers and branch offices are located in various countries. Lion air started out its progress and extension using global strategy. It expanded their branches to Singapore, Malaysia and Vietnam.
Brand image performs an important role on the success in a service business like air range business. Because of this, there has to be a good belief and reputation on Lion Air for customer in outsides Indonesia when applying global strategy. Eventhough customers in Indonesia got accepted Lion Air as a reliable and low priced carrier, it is vital for Lion Air to bolster this notion to its global brand in order to contend with other brands like Air Asia, JetStar, Tiger Airways globally.
Therefore, Lion Air added 60 completely new Boeing 737-900ERs to meet customer expectation of protection. Furthermore, Lion Air also cooperates with Boeing as their auditor to be able to improve their safety standards to meet international benchmarks. Lion Air is the first air series in the world that using the new Boeing 737-900ER. From this point, Lion Air image as a premium low priced carrier will incline.
Lion Air use differentiation strategy that provides a low price solution and top quality services to the customer. Lion Air provides two classes for the couch, business category and economy course. The target is to attain competitive advantages by offering superior products and services with good deal. Within the differentiation strategy, Lion air got done research on identifying and knowledge of their concentrate on customer so they give service that meet customer needs. Furthermore, they also do examination and identifying on their key competitors in order to innovate their services for changing trends.
Lion Air offered various home and international destination with good deal, therefore Lion Air can become the market innovator for air lines industry in Indonesia defeat its rival Garuda Indonesia with 30, 71% market show (Tempo, 2010). Considering the majority people in Indonesia are middle - low category people, therefore Lion Air give you a low price service that may be afforded by many people. Lion Air doesn't give a premium service as Garuda Indonesia; nonetheless they just give a safe practices and comfortable flight with low price.
The value chain construction has been used as a highly effective analysis way for the proper planning of company. Furthermore, most organizations have activities that link together to construct the strategy of the business and form the worthiness chain. The value is split into two categories. They are most important and support.
Lion Air looked after the need of petrol, food and refreshments to be shipped just in time to be able to meet client satisfaction. They only use a trusted supplier to supply foods and beverages, therefore customer will get the only fresh food. Lion Air expect a well-timed delivery for his or her company, to ensure reductions in stock turnover, therefore they can lowering wastage and keep the inventory cost down.
The emotional bonding is the key to building devotion and one of the major factors that encourage the customers to repurchase the airline products. Because of this, Lion Air handles this matter with providing their customer with online ticketing and provides a day ticketing service for e book the airline flight and disaster assistance (Ionides, 2006).
Lion Air collaborates with Boeing to audit their security standards and offer them with the most recent style of 737-900ER that more efficiency in terms of gasoline conception, therefore they can keep their cost down.
Promotion and sales of Lion Air are mainly by way of a network of travel firms and mass media. Furthermore, Lion Air stimulates their airline using their 60 brand new Boeing 737-900 Ers that launched and used firstly by Lion Air on the planet.
Lion Air provides a day ticketing service and call centre, therefore their customer can reserve the flight every time they want.
Lion Air co-operation with any companies that can offer them with the very best quality and low price.
Lion Air enhanced their business system with the latest computer booking systems, flight scheduling systems; therefore they can meet their customers' satisfaction with effective and efficiency way.
Employee development can be an essential part in the Lion Air. The employees of the company are 4, 500 people worldwide. Lion Air offer an education and training program for their employee, such as developing them for advance positions or programs, training employees to execute effectively in their current job, orienting employees at work. Moreover, Lion Air multicultural management team are planned to promote and support business goals of the business.
Lion Air currently turn into a global corporation with branches at Singapore, Malaysia and Vietnam, headquarter in Indonesia. Lion Air cooperation with the local agencies to manage and audit their regulatory conformity, legal issues and pr.
The value chain construction has been used as an efficient analysis way for the strategic planning of firm. Furthermore, most organizations have activities that link together to construct the strategy of the business and form the worthiness chain. The worthiness is divided into two categories. These are main and support.
Core prices are the main principals that guide the organization's strategy. Additionally, the long run success of firms is mainly related to the strong key values of the companies (Johnson, Scholes & Whittington, 2010).
The core values of Lion Air will be the skills of its top management at planning marketing strategies and the interpersonal skills of its airfare attendants. Making flights as comfortable as you possibly can with low price is what they do the best.
In this section, the procedures by which the Lion Air's strategy recognized has been developed will be described by two wide-ranging explanations, designed strategy and emergent strategy, being that they are not mutually exclusive.
Strategy development helps organizations to preparing company perseverance for proper decisions. The business targets, goals, missions and perspective are established through strategy development. Out of this point, the company can arranged a detail plan to achieve their goals and targets. Strategy development can be developed in a few ways. For instance, both of these methods commonly arise in organizations that are meant strategy and emergent strategy. Intended strategy is a formulation of a desired strategy as organized systematically by management team. Within the other hands, emergent strategy is the decision that emerges from the superior processes where managers carried out the supposed strategy and adapt to the changing exterior environment (Offer, 2006).
According to Lion Air, strategy making is a combination of supposed and emergent as their multiple strategy development process. An supposed strategy characterized as primary process which is developed through Lion Air formal plank appointment and strategy planning. While emergent strategy in Lion Air, dominantly performed by the middle management because of this of multiple strategic decisions that signify assistance team work. For this reason, corporate headquarters units general recommendations of vision, quest statement, performance focuses on and business rules. However, there's a considerable liberty for division manager to adjust, adjust to the great changing and competitive environment.
Strategy is the course, the most feasible shortcut for achieving the desire goals. Company is not practical without strategy, thus it requires attention and scrutiny for producing strategy. However, organisation must determine its corporate value for developing and communicating what sort of organisation operate. The fact of corporate and business value is the organisation's center value, the underlying key points that guide an organisation's strategy.
Lion Air has stable determination and determination to diffuse its designed strategy to stimulate its stakeholders; it includes formulated and designed its desired strategy through strategy control as eyesight.
Mission and vision are co-related with the purpose and strategic path of a business. They play an important area of the strategy-making process.
Lion Air has strong commitment to utilise its ingenuity and invention to offer travellers better air travel experience with not only low airfares, but through a thorough ranges of its value-added services.
Consistent service delivery, safety and security are the base blocks of everything at Lion Air.
Our dedication to these traits has resulted in our airline's success.
To accepted and operate internationally, Lion Air providing the needs of these customers, personnel, and associates with a business design that is based upon functional efficiency, invention, and customer satisfaction.
Offer opportunities for holidaymakers and appeal to budget-conscious customers to use Lion Air more regularly with economic cost respect to its regular low fares.
Mainstream cost authority within operations, therefore in a position to keep its fares consistently low for vacationers.
Maximise daily service industries offered by Lion Air's aeroplanes with successful air route scheduling.
Strategy development is equated with formalised tactical planning, it is normally the defining procedure for strategy regarding to decision making on tool allocating for seeking the desired strategy, basically connect to its people and capital. Strategic planning may take the form of systematised, step-by-step, chronological techniques to develop or organize an organisation's strategy (Johnson et al. 2008).
The circle's starting place for Lion Air is a set of business analysis strategy of external environment of Indonesia as mentioned partly 1, the PESTEL analysis comprise of political, economic, public, technology, environment and legal. Due to a specific group of vision, mission and objective, Lion Air has concluded the initial assumption of real macro-operational environment in Indonesia (Section 5) as possible for air industry. Lion Air anticipates the soaring demand for air travelling in its archipelago state in the relation to conducive political environment, emerging economical, and effective communication network.
Success is merely a focus on. The operations of success are incredibly much similarly climbing the staircase, one have to be settled down before the other. Air travel must keep on expanding its range, wider convenience and prolong its network. Lion Air has an enterprise unit division which responsible for explore for the near future step. This team uncover what ought to be the next vacation spot the flight should place their investment to; by analysing many factors of the targeted destination include demography, monetary deal, the demand for traveling and many other sectors. For some targets, for illustration Surabaya, Manado, Ambon, Makassar, the research might not be possible, but it can be offset by the favourable geographic condition which allows it to be the bond hub using its proximity. Once the consequence is positive, the team then draw up strategic plans to present to the corporate centre for speaking about and evaluating. The strategic strategies must undergo many steps of revising and speaking about before it can be finalised by the organization board.
Retrieved for Lion Air's Trip road http://www2. lionair. co. id/flightroutes. aspx
Open up commercial plan is a complicated task, it needs complicated types of procedures. Corporate must outlay huge investment in center as well as for dealing with indigenous expert and conquer some government laws. Therefore encouragement is a significant risky job if not prudently evaluate.
The commercial plan results from the acceptance of the business enterprise plans. Lion Air's planks are the eventual reviewers of the proper plan. The table have jurisdiction to decide whether the plan should be ratified or need further revised. The plank then prioritize the sequence of corporate strategies and do something. As the consequence of effort, started out from only 1 daily airfare, within merely 9 years time, Lion Air currently links to over 36 destinations and functions up to 226 plane tickets daily. Inside the immediate future, traveler can fly extensively throughout the Asia Pacific region with Lion Air.
Externally imposed strategy is the way of coping with the influences triggered by powerful exterior stakeholder. This is basically a hurdle which threatens the procedure and development of corporate plan. These obstacles include government regulation, measure, public consciousness etc. Strategies being impose in such ways might have been determined using the tools of examination and analysis associated with a rational/ analytic way, or perhaps through systematic tactical planning. Lion Air has been versatile in discovering externally enforced strategy, thanks to conducive Indonesian political environment which enforced fewer barriers in airline industry. Due to minor obstacles, Lion Air has expanded their scope effectively within the spot (as mentioned in the Part I section 6. 1 Potential Entrants). International extension is biggest challenge for air travel industry, but it inevitably entails a lot of obstructions. To beat these road blocks, externally imposed strategy must be prudently designed, all the influent factors must be studied to account to determine best answer then reinforce. For instance, from the consequence of externally enforced strategy, Lion Air created a new joint venture collaboration and the possession was to be split 51% to Brisbane-based SkyAirWorld. This new relationship entitled the Lion Air Australia to operate as any other Australian-owned flight on the same air traffic protection under the law. (As stated partly I section 3. 1 The Ownership of Lion Air).
Over time, strategies have to be assessed and must be adaptable based on the real situation. Typically, it changes by building on and amending what has gone before. We can say that experiences and problems lead to better point of view for future orientation. Another phrase, strategies advance and inform tactical decisions, which consolidate strategic direction.
Emergent strategy comes about through everyday regimens, activities and procedures in organizations leading to decision that become the long-term path of the organization. (Johnson et al. 2008). Not merely the strategy, but the vision, mission and objective also needs to be examined and rectified, so which make it easier for corporation to shift consequently. In the information of emergent strategy, corporation will have the ability to discover some loopholes from earlier operation, and then make better solutions and new way. The emergent strategy development contains four processes, logical incrementalism, resource allocation processes, ethnic functions and organizational politics.
For Lion Air, the global ambition emerged after the accomplishment of earliest goal, a desire to own best air service quality within Indonesia. In the first stage, air travel industry was only run by administration, this state-owned air travel offered high fare traveling within less course and poor service. The progression of airline was gradual since there is no competitor. There was no private company interested to invest in this sector then. Rusdi Kirana saw this unsatisfactory as the opportunity, the first air option of Lion Air was Pontianak where is the house town of Kirana's family. Many people said that, Rusdi made a decision to create his own air travel while he was postponed and waiting for several hours in the air port. This sounds ridiculous, but it could be true. The initial target of Lion Air was to be always a budget airline that offer low reasonable travel and improve the service quality, such as safe practices, better center, and convenience (no delaying).
From here, we can easily see the rational incremental of Lion Air, it further produces its strategy by experimentation and logically learning from partial commitment rather than through the formulation of total strategy.
Lion Air did not do away with the uncertainty. In its earliest level, Lion Air outlaid less capital to get on only 1 route with an individual aircraft. This preliminary investment performed as the experiment for future speculation, it driven the and marketable of the industry. If it had not been favourable, corporation would have improved their strategies and goals, they probably arrived as an extravagance brand designate for high end market, or divested if the business enterprise is considered not viable. In this sense, Lion Air has already established specific tool allocation technique to avoid the huge loss. Because they identified the possible opportunity, huge pool of learning resource has been spent to buy and strengthen its fleet and open up new routes locally then internationally. Just how resources are allocated establishes its emergent strategy within strategy development.
Organizational politics might be a factor of constrains in a organization, if not properly deal with, it might cause internal stress and blemish innovation and creativity. Presently, Lion Air jv with SkyAirWorld, but because of the corporate and business planning strategy, all ultimate decision must be approved by the board director, which means that the most effective drive reside on the mother board of Lion Air (as mentioned in Part I, section 3. 1). But still, if politics emerge within some departments, it will be affects the analysis processes. In such a sense, the mother board should work directly with the subordinate division in the analysis process. The board should preside over as a moderator to ensure unify and compromise, all the champions and powerful stakeholder should discuss all the issues and problems in light and overboard.
Cultural process details the results of the taken-for-granted assumptions and behaviour in the business. For the company to run effectively it must disregard the paradigm and continue searching for new ideas as the ways for operating rather than depending on only 1 source of income. So Lion Air shouldn't stick to its routines, rituals and icons. Lion Air should think out of the package and broader its opportunity. The culture here might be considered a mistaken key assumption that really the only earnings source for airline industry is providing the air solution. But in truth, there are several opportunities that connected directly with the airline industry such as courier service, duty-free shopping and restaurant etc. These will finally make more the earnings, spur the sales, build up loyalty and eventually end up being the competitive advantages or even core competency. Therefore the strategy development might need to be directed to these.
Although a corporation consider more complete and comprehensive when they arranged the strategy, the business cannot perfect forecast and control the changes of market. Therefore, in the process of putting into action the strategy, the company should continuously to evaluate the strategy and present the target appraisal, to correct the problems timely, to match the capricious market, and then the company can achieve sustainable development. A couple of three key success conditions which may be used to evaluate the viability of strategic options involves suitability, acceptability and feasibility (Johnson, Scholes, & Whittington, 2010). In this part will evaluate the suitability of the Lion Air's strategy.
Suitability is concerned with whether a strategy addresses the key issues associated with the strategic position of the business (Johnson, Scholes, & Whittington, 2010). Quite simply, suitability means whether the strategy make economic sense and suited to environment and company capacities. Partly 1 of the assignment has reviewed the PESTEL construction and Porter's 5 makes model to investigate the macro and industry conditions of Lion Air, as well as the main competency of Lion Air. For the analysis of the suitability of the Lion Air's strategy, it'll base on the earlier examination of PESTEL construction, Porter's 5 pushes model and core competency.
According to prior PESTEL framework evaluation of Indonesia, there's a conducive political environment for Lion Air can operates and develop its business safely and securely. Additionally, the emerging inexpensive environment in Indonesia triggers the improvement of living standards, people willing to travel more. Furthermore, Indonesia can be an archipelago country, the Indonesian have a higher demand of air service; they take flight just like the Chinese by train in China. Indonesia flights is important not only since it is the fastest way to travel, however in many situations because there are no other forms of transportation available. The many islands and metropolitan areas are linked through airways system. Therefore, a convenient and cheap air service is exactly what the clients expect. As an inexpensive carrier, Lion Air offers the low fare for customers to gratify the dreams of travel. How Lion Air can offer the lower fare than others? Firstly, Lion Air boosts the couch kilometre usage and the flight time. Generally, the common of an airplane flight time is about 9 hours each day. Lion Air through increased efficiency lengthened the air travel to 10-11 hours per day. The common seat kilometre usage for the common air travel is 70%-80%, Lion Air through sensible allocate to raise the seat kilometre usage over 90% as you possibly can. Subsequently, Lion Air is a no-frills air travel. It means that no assigned seating, in-flight entertainment, or even free food and drink. Finally, Lion Air promotes customers through the network to choose the ticket directly. It does reduce the ticketing costs. For these reasons, Lion Air has slice the cost effectively; therefore Lion Air provides the low fare to customers.
Based on the Porter's 5 causes model examination, the airline industry is very challenging in Indonesia. First of all there a wide range of competitors fighting with Lion Air, such as Air Asia, Batavia Air, Mandala Air, Sriwijaya Indonesia and Garuda Indonesia. These stated names (except Garuda) will be the budget airlines that offer numerous air travel routes in Asia, so they essentially compete on price. Customers always choose the main one who gets the cheap fare and high quality service. Based on the common features of the low cost carrier, every air travel companies have their own technique to decrease the cost; however the result is nearly same, the reduced fare. How do customers choose the flight companies that happen to be offer same price seat tickets? Therefore, differentiation strategy becomes important for flight companies. A differentiation strategy seeks to provide products offering benefits that are different from those of rivals and this are widely appreciated by customers (Johnson, Scholes, & Whittington, 2010). In prior part has point out about Lion Air use differentiation strategy to be different from other airlines. Lion Air provides two classes for the seat, business school and economy category. The purpose of this is through offering superior products and services to gratify different need from customers. Brand image is an important aspect for customers to make decision. Lion Air has a good reputation in Indonesia. The Indonesians acquired accepted Lion Air as a trusted low-cost carrier. Lion Air has continually upgraded its brand image. Lion Air has order the new Boeing 737-900ERs and cooperates with Boeing for enhance the safety criteria to meet up with the international safety requirements.
In the part 1 of the assignment has mentioned the primary competencies of Lion Air are cost efficiency and service. Cost efficiency has manifested in many ways. Customers can reap the benefits of cost efficiencies in conditions of lower prices or even more product features for the same price. The management of the price base of a business may be a basis for reaching competitive benefit (Johnson, Scholes, & Whittington, 2010). Lion Air's motto "we make people take a flight" guide Lion Air offers the low fare to customers in order to meet up with the dreams of travel. Lion Air through every types of technique to reduce the cost. Cause of Lion Air regularly reduces the price, therefore Lion Air could gain the gains while provide low fare. Lion Air also invests on the old terminal of AIRPORT TERMINAL in eastern Indonesia. The strategy aspires to extend the airline's market in eastern Indonesia, and increase maintenance efficiency. Lion Air is very matter about the safeness of customers. Lion Air provides Customer Lion FLIGHTS Insurance - an inexpensive and convenient way for Customer to protect their trip (www2. lionair. co. id). Lion Air is increasing its flight basic safety standards through little by little rolling out the Required Navigation Performance (RNP) methods and the benchmarks will built-in in every the aircraft eventually. For these strategies, customers could experience the low fare and high quality service.
Lion Air overall strategies include global strategy, brand strategy and differentiation strategy. Additionally, Lion Air has make effort on improving the grade of service, customers' protection and reduces the cost. According to the analysis of the suitability of the Lion Air's strategy based on PESTEL construction, Porter's 5 pushes model and central competency, the strategies of Lion Air used are fit with the macro environment in Indonesia and Lion Air's core competences. Lion Air's position as the low carrier air line fit Indonesian market considers the economical and physical condition of Indonesia.