Current strategic intent of Yeti Airline
Strategic management is important for the contemporary business organizations. This is due to the reason that in the current competitive state of affairs, strategic intent of the organizations determines their effectiveness in doing business in the market. Different organizations are having different set of strategic intent and business strategies that helps them to operate effectively (Hill, Jones and Schilling 2014). However, in different cases, gaps get evident in the existing business strategies for the business organizations. Importance of strategic management and effective business strategy is more important for the smaller and lesser known organizations due to the reason that they need more competitiveness in competing with the large business organizations.
Yeti Airline is a leading airline in Nepal. They are based in Katmandu, Nepal. They are founded in 1998 and are having total eight aircrafts. However, they are having their operations only between the domestic destinations and in according to the smaller infrastructure, Yeti Airline is only having smaller aircrafts (Yetiairlines.com 2018). In the domestic market, they are having favorable market share and mainly competing with Buddha air and Necon air.
This report will discuss about the strategic intent of Yeti Airline that they currently follow in their existing market. In addition, the major gaps will be identified from their existing strategic intent and reasons for the failure will be analyzed. A new strategic intent will be recommended in this case that will be more effective for Yeti Airline.
Currently, Yeti Airline follows the cost leadership strategy in their existing business operation. The main reason of initiating the cost leadership strategy is limited market area coverage (Eden and Ackermann 2013). Nepal is a small country with having smaller airports. In addition, the majority of the revenue of the airline industry of Nepal comes from tourism. Thus, market scope is limited for all the airlines operating in the Nepalese market. Almost all the airlines are having small aircrafts such as ATRs and Dornier and they serve all the locations in and around Nepal. Thus, scope for service differentiation is also less. On the other hand, the scope for market focus is also limited due to the reason that majority of market revenue is coming from the of international tourists and that is also smaller in size (Bastola 2017). This is leading Yeti Airline to initiate cost leadership strategy to attract more customers over their competitors by offering lower price. This is helping them in gaining competitive advantage within their limited market scope. In addition, the cost leadership strategy of Yeti Airline is effective and suitable for the small haul route in the Nepalese market. Almost all the domestic routes in Nepal are small and there is very less need of providing premium services to the customers. This is also helping Yeti Airline to have the maximum outcome from their current business strategy (Kaliappen and Hilman 2013).
One of the major gaps identified in the current strategic intent of Yeti Airline is lack of distinctive competitive advantages of them over their competitors. This is due to the reason that the service quality and service features of Yeti Airline are same as their competitors (Alamdari and Fagan 2017). Thus, other than offering attractive price deals, Yeti Airline is not having competitive advantages over their competitors. In addition, it should be noted that as majority of the revenue is coming from the international tourists, thus cost leadership strategy is much effective. This is due to the reason that majority of the international tourists do not get attracted by cost effectiveness rather they are having the need for service quality and distinctiveness. Thus, the viability of the cost leadership strategy of Yeti Airline is less and it is failing to fetch revenue for them in the long run (Lechner and Gudmundsson 2014).
Gaps in the current strategic intent
Another major reason for failing of current strategic intent of Yeti Airline is increase in the competition in the Nepalese airline industry. In the recent time, number of smaller airliners from neighboring countries is willing to enter in the Nepalese market and some of them have already entered. These airliners are having more access to the financial and other resources compared to Yeti Airline and they are offering more affordable price in the market. This is also posing challenge for Yeti Airline in maintaining their cost leadership strategy as against the newer entrants in the market (Box 2014). It should also be noted that price of jet fuel is showing an increasing trend in the recent time that is influencing the pricing decisions of the airliners. In this case, Yeti Airline with having cost leadership strategy is finding it difficult in maintaining their profitability from their daily operations. Price of fuel is same and similar for all the airliners operating in the Nepalese market and thus the only way to maintain the cost leadership strategy is by reducing the ratio of profitability. However, with the raid increase in price of jet fuel, the viability of cost leadership strategy for Yeti Airline is decreasing.
The last reason of failing of current strategic intent of Yeti Airline is lack of growth opportunities. This is due to the reason that cost leadership strategy is not helping Yeti Airline in enhancing their market share or growth. This is due to two major reasons with one being the limited market scope in Nepal and another one is different market scenario in the foreign market. Initiation of the cost leadership strategy limited the profitability for Yeti Airline and it has restricted them in developing more infrastructures to enter in the foreign markets (Tanwar 2013). Therefore, it can be concluded that without having the growth opportunities, no strategic intent of the organizations can be viable enough and they ought to fail in the long term. In the case of Yeti Airline, the lack of growth opportunities coupled with emergence of new competitors in the market lead to further adverse impact on their strategic intent.
It is recommended that Yeti Airline should initiate service distinctiveness strategy or service differentiation strategy. This will help them to gain competitive advantages over their competitors. In addition, initiation of the service differentiation strategy will also help Yeti Airline to offer distinctive service to their customers in terms of service quality, aircraft types and airport facilities (Banker, Mashruwala and Tripathy 2014). These distinctive features will attract more foreign tourists over their competitors. In the current time, service scope of the airliners is not limited to the onboard facilities but it starts from the check in time. Thus, it is recommended that Yeti Airline should design their service offerings from the check in facilities of the customers. In addition, this strategy will also help Yeti Airline to charge premium from the customers in exchange of the added services. Hence, they will have the added source of revenue that will in turn help in further development in future.
Recommended strategic intent
It is also recommended that market focus strategy can also be initiated by Yeti Airline. It is important to determine and identify the maximum inflow of tourists by country and specific service offering can be designed based on the taste and preference pattern of this customer segment. For instance, if the major section of the customers for Yeti Airline is coming from the Australian market, then the service facilities should be designed in accordance to the Australian taste and preference pattern. This will help to cater to major section of the customers effectively and it will help in enhancing the market revenue. It should be noted that both the service differentiation and market focus strategy will help Yeti Airline to grow further in the domestic as well as in the foreign markets. Strategic intent of an organization will be viable only when it will provide growth opportunities.
In relation to the differentiation and market focus strategies discussed in the above section, it is also recommended that Yeti Airline should be more focused in enhancing their international business rather than just concentrating on the domestic market. Both the above discussed strategies will help Yeti Airline to have growth opportunities in terms of increased fund and resources. This will enable Yeti Airline to increase their infrastructure in terms of service offerings and aircrafts. This is also important due to the reason that in order to tap the foreign markets, preferably the markets in the neighboring countries, Yeti Airline should have larger and wide body aircrafts rather than just having smaller ones.
Conclusion
Thus it can be concluded that cost leadership strategy of Yeti Airline is effective only in short term but it is not viable in the long term. In this report, the major reasons of failing of their current business strategy are also being discussed in their report. There are number of gaps being identified with their current business strategy. In accordance to the identified issues, a few recommended steps are being discussed in this report. Recommended steps discussed in this report included a number of strategies that will help Yeti Airline to have more market potentiality in the domestic as well in international market.
References
Alamdari, F. and Fagan, S., 2017. Impact of the adherence to the original low-cost model on the profitability of low-cost airlines. In Low Cost Carriers (pp. 73-88). Routledge.
Bastola, D.P., 2017. Organizational analysis of the aviation industry from the performance-based perspective. Organizational analysis, 3(10).
Box, T., 2014. Small firm strategy in turbulent times. Academy of Strategic Management Journal, 10(1).
Banker, R., Mashruwala, R. and Tripathy, A., 2014. Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?. Management Decision, 52(5), pp.872-896.
Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Kaliappen, N. and Hilman, H., 2013. Enhancing organizational performance through strategic alignment of cost leadership strategy and competitor orientation. Middle-East Journal of Scientific Research, 18(10), pp.1411-1416.
Lechner, C. and Gudmundsson, S.V., 2014. Entrepreneurial orientation, firm strategy and small firm performance. International Small Business Journal, 32(1), pp.36-60.
Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and management, 15(1), pp.11-17.
Yetiairlines.com (2018). Yeti Airlines Pvt. Ltd. [online] Yetiairlines.com. Available at: https://www.yetiairlines.com/ [Accessed 19 Aug. 2018].
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