szechuan airlines

7/28/2019 SzeChuan Airlines

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The airline was established on 19 September 1986, with operations starting 14

July 1988 between Chengdu and Wanzhou. In August 2002 it was reorganised and the

Sichuan Airlines Group, which is owned by the provincial government, became the major shareholder (40%). The other shareholders are China Southern Airlines (39%), Shandong

Airlines (10%), Shanghai Airlines (10%) and Gingko Restaurant (1%). It employs 1,844

staff.

The company has consistently made profits for eight years. As the domestic air

transportation market becomes increasingly competitive, it is continuously exploitingnew markets and seeking every possibility both inside and outside China. It has entered

into partnerships with numerous domestic and international airlines supplying passenger

or cargo transportation services that suit all requirements.

3.2 Competitor Analysis

Sichuan Airlines is an international company, and going global invites a lot of competition. Sichuan Airlines has to deal with the competition of local companies in the

same field- Airline services. Competition for Sichuan Airlines would also be encounteredin the virtual world-the INTERNET. As they indulge into the use of modern technology

such as the public domain would invite competition on the global scale.

Sichuan Airlines would encounter numerous constraints, as an international

enterprise, it would have to deal with government policies and airport pricing that are

inherent in the local markets they serve not excluding their cultural differences and

values of the community.

Different localities and countries have different technological standards, and

quality control policies, which Sichuan Airlines would have to adhere to, by adherence tothese policies; certain intended developments may be possible in certain communities but

not acceptable in others.

3.3 Collaborations

With the present corporate mechanism, Sichuan Airlines has accomplished

substantial Cooperation in various forms with the shareholders, including Code sharing,ticket price control, a frequent flyer program, sales agency system, and transport and

marketing Networks. The advanced modern aircraft, the flexible effective marketing

strategy and policies and the efficient operational environment have laid a solidfoundation for the rapid, steady, sustainable and harmonious development of the

company.

TravelSky Technology Limited, a provider of information technology solutions

for China's air travel and tourism industries, has reached a strategic cooperation

agreement with Sichuan Airlines Company Limited to provide the carrier with

information services and support as well. Under the agreement, TravelSky will offer



technology and information services including traveler service systems, online value-

added systems, and frequent flier products.

Also, Sichuan Province Airport Group had signed a memorandum of cooperation

with Japan Airport Terminal Company, with the intention of providing a non-stop service

between Chengdu, the capital of Sichuan Province, and Tokyo. The cooperation is aimedat launching regular direct flights linking Chengdu Shuangliu International Airport and

Tokyo Haneda Airport. Currently, passengers from Chengdu have to transfer in Beijing.

3.4 Environment (PESTLE)

Political

Sichuan Airlines has been very fortunate during recent years. The political scene

in the region has been quite favourable because most of the countries have been makingagreements that facilitate better trade between countries especially in relation to the

aviation sector. These countries have signed agreements between themselves and alsowith other countries. These agreements have opened up Sichuan Airlines to the world and

have provided ready made markets for the Airline Company.

Any aviation company must be ready to tackle high fuel costs and Sichuan

Airlines is no exception,. In previous years, the country reported an increase in fuel

expenditure of seven percent from the previous year. Fuel costs represent the highest

form of expenditure in the company as this has really eaten into their profits.

Economic

The Asian Pacific region has been nurturing its economy at a rapid pace. Most of

the countries located there are becoming more mature. These economies are growing at a

substantial rate consequently affecting their overall income. This means that most of them are earning more revenue per capita and they can therefore afford to use air

transport. This is probably the reason why Sichuan Airlines has been steadily growing

over the past few years. Markets are changing rapidly and more governments in the

region are streamlining their economic policies so as to suite the Airline industry. Airlinetraffic in the rest of the world has reduced drastically.

Social

Sichuan Airlines operates in a region where there are numerous employees and

workers. Most of these workers rarely demand for high compensation. Labour issues areadversely affecting employers in the region and also in the rest of the world. Workers are

becoming increasingly ware of their potential and most of them are demanding more.

Many Airline Companies are increasingly recruiting different types of labourers. This is

especially with regard to the fact that there are numerous types of Aircrafts in any one



type of Airline. Sichuan Airlines has not bought too many varieties of Aircrafts.

Consequently, there is room for the Company to grow and without having to spend too

much in the labour section.

Technological

The world had a technology boom in the nineties. However, there was a

technology but in the decade 2000. Companies that were using technology to gain

competitive advantage over their players in the industry may now have to look for other sources of competitive advantage.

Additionally, Airline companies have to deal with the advent of better informed

clients. Most people are now more knowledgeable about the reputable companies. Theycan get all the strengths and weaknesses about a given firm using the internet. For

instance, clients tend to shy away from airlines with numerous stopovers in comparison

to those ones that have direct routes. These are al issues that can be checked out at the

‘touch of a button'. Sichuan Airlines has been affected by this issue because it needs toascertain that it offers better services to its clients and that it can meet future demand.

Legal

It should be noted that in the past, most governments within the Asian Pacificused to operate under a paternal government policy. Governments felt that thy had to

protect airlines against external factors, but after the recent policy changes, Airline

industries have now been opened up to competition and this is the reason why Sichuan

Airlines have grown. They can now follow the rules of economics to sustain competitiveadvantage instead of worrying about government hindrances. This means that there are

less legal hitches when running operation in the region.

Environmental

It is a known fact that Airline Companies need to adopt strategies that providethem with a good corporate image. For instance, some Airlines may decide to take part in

environmental sustainability projects such as tree planting. Additionally, some companies

may also exercise extra caution in terms of the quantity of waste that they send to the

landfill. This is something that seems to be taking a lot of attention from Airlinecompanies. Lastly, the issue of recycling is also taking up a lot of precedence in the

Airline industry. Some Companies are offering recyclable cutlery to their clients in order

to further this campaign. All in all, it should be noted that most environmental campaignsin the Airline industry are part of the corporate responsibility strategy within a specific

Airline Company.

3.5 SWOT Analysis

Strengths



Sichuan Airlines is a vibrant company that is involved in offering a simple “no

frills” service at fares that are on average significantly lower than those offered bytraditional full-service airlines.

Another observable strength of Sichuan Airlines would be well-rounded andmanaged business and their turnover rate; this gives them an added advantage over other

Airlines.

Sichuan Airlines also employs and trains staffs with superior interpersonal skills,

and they manage the entire creative process effectively.

Weakness

Sichuan Airlines at a glance would appear to be a weakness-free enterprise, but

there are underlying weaknesses inherent at Sichuan Airlines. One of such includesminimal technical staff workers and overdependence on few key staff.

Sichuan Airlines would need an enormous number of technical professionals,

especially in the implementation of their internet booking and distributors.

Sichuan Airlines also would need to have high technological equipments, and

connections to sustain and serve such a huge network of company subsidiaries and

affiliates, as appropriate.

Opportunity

Sichuan Airlines stands at the gate of profitable opportunities, their recent

developments and intended expansions will give them a global exposition. As they

venture into internet booking and ticketless services for their marketing processes, theywould be open to electronic commerce business solutions for their enterprise.

Sichuan Airlines stands to encounter other opportunities like:

• Export markets offering great potential

• Distribution channels seeking new products

• Scope to diversify into related market segments

Threats

Even though Sichuan Airlines is currently on the peaks of success, they would becareful and not nonchalant to the threats they are bound to encounter.



One of such threats would be security of their networks. The internet is a public

domain and as such is vulnerable to attacks from hackers and viruses, Sichuan Airlines

ought to be conscious of these threats and have proper plans and control to counter any of these.

Another threat to Sichuan Airlines is from the local competitors in the variouscountries they are having affiliates or subsidiaries. Sichuan Airlines needs to be in

accurate pace with the market demands and policies for these local territories, because

economic slowdown could reduce demand.

4.0 OBJECTIVES

4.1 Marketing Objectives

• the stabilization and increase of operational and services performance

• to provide extensive communication to all stakeholders.

4.2 Financial Objectives

• assurance of the airlines financial liquidity

• reduce the financial losses

5.0 MARKRT SEGMENTATION

Sichuan Airlines segment the market into two major segments, one profitable

(Business Travelers) and one unprofitable (Leisure Travelers). These two segments can

further be broken down by average length of trip, frequency of trips, and loyalty to a

certain airline.

Business travelers are very profitable for airlines because they tend to buy their

tickets at the last minute when prices are higher and their schedules are not flexibleenough to change flights. They often don’t have time to go with a substitute means of

travel. Business travelers pay for the convenience factor. In an economic sense, the price

is relatively inelastic.

Leisure travelers are not nearly as profitable because they are more willing to

change flights and/or modes of travel based on prices. The leisure traveler segment isvery price elastic. This market segment requires a cost leadership method will dominate

this market probably in the end forcing out the traditional carriers who can’t match thelow fixed cost structures of the cost leaders.

IDENTIFICATION OF TARGET MARKET

Target Market is a set of buyers sharing common needs or characteristics that thecompany decides to serve. There are three key factors to target market selection:

• Segment size and growth



• Segment structural attractiveness

• Businesses objectives and resources

WAYS TAKING TO IDENTIFY THEIR TARGET MARKET

For Sichuan Airlines, the following are some of element identified that Szechuan

Airlines used to identify their target market and formed a niche market.

Branding

Sichuan Airlines went into intensive General advertisements and other high profile

activities, which contributed, to the high offering of their company's image. These pointsof contact with their target customer help them to mold their image, which in turn created

loyalty from their customers.

PhilanthropyDonating money, services, and/or time can build trust and a positive image for the

business. Philanthropy contributes both toward a company’s branding efforts and internal

well-being. Sichuan Airlines embark on this to build and attract more customers. Withthis incentive and philanthropy, more and more customers are attracted to their business.

New Product/services Pipeline

New products in development represent your future sales. Sichuan Airlines has extended

its services to different part of the world. Sichuan Airlines was initially a local company

but it has become international with its extension of its services to different part of the

world to meet up with their market. Sichuan Airlines get feedback from their customers

or potential target market, and they designed new services to meet their needs, this practice is ensuring a demand for their products in the future.

Reduced Price Sales

This was one of the basics of securing a target market for Sichuan Airlines. They reduced

their price to suit their class of customers. Sichuan Airlines saw a need for a lot of low pay salary citizens who could not afford the money to travel home. With the introduction

of their services of low fares, most people can travel home and most people that can only

afford to travel once could travel up to three times with their cheaper fares. This limited

time sales encourage customers to act. You likely have customers intending to buy buthave not "gotten around to it". Holding a reduced price sale will give them incentive to

purchase.

Group Discounts and Offers

Discounts or other offers to a specific group can help exposure your business to new

customers, resulting in a sales surge. Sichuan Airlines is a ticketless Airline that allowscustomers to purchase their ticket online with at a discounted rate. They also have a

scheme of group discount and this help to get more target market, especially internet

based customers.



Foreign workers and Contractors strategy

Sichuan Airlines also target most foreign workers such as those from Indonesia,Singapore, Thailand, Macau who may not afford the expensive flight home and offer

them the cheap fare which attracted most of them as would go home very often without

paying much.

MARKETING MIX ANALYSIS

In order to achieve its marketing objectives Sichuan Airlines needs to have a strategy that

includes different elements - the various parts of the marketing mix. Calling it, a mix is to

make sure one get the balance right between the different elements. Marketing mix is acombination of marketing tools that are used to satisfy customers and company

objectives. Consumers often call the marketing mix "the offering." An offer is controlled

by the following variables that are often referred to as the four Ps in marketing:

•

Product• Price

• Place (Distribution)

• Promotion

PRODUCT /SERVICES

The term "product" refers to tangible, physical products as well as services. It also means

defining the characteristics of your product or service to meet the customers' needs



6.0 ALTERNATIVE MARKETING STRATEGIES

Sichuan Airlines Launches Credit Card Telephone Payment Service

To facilitate passengers booking tickets during the Spring Festival period,

Sichuan Airlines has launched a credit card telephone payment service in cooperationwith the third party payment service provider YeePay.com.

The new service, which is applicable to credit cards from more than ten banks,

allows passengers to book air tickets and complete the payment by making a telephonecall. By calling Sichuan Airline's 24-hour service hotline 028-88888888, consumers can

inquiry about flight schedules, book an air ticket, and pay for it.

Sichuan Airlines Signs Deal With Abacus

Sichuan Airlines is now the ninth mainland China carrier/group to sign on toAbacus' reservation inventory.

Sichuan Airlines' Direct Connect Availability (DCA) participation with Abacus isits first with a foreign Global Distribution Service (GDS) and the move is expected to

allow the airline to attract a larger share of the domestic and international travel market.

Through the Abacus DCA service, Sichuan Airlines is given the power to exercise point-of-sale quota allocation and control their flight inventory hence Abacus subscribers

can now receive real-time flight status and seat counts directly from their own

reservations system.

Porter's Generic Strategies

Companies can achieve competitive advantages essentially by differentiating their

products and services from those of competitors and through low costs. Firms can target

their products by a broad target, thereby covering most of the marketplace, or they canfocus on a narrow target in the market (Lynch, 2003). According to Porter, there are three

generic strategies that a company can undertake to attain competitive advantage: cost

leadership, differentiation, and focus..

Cost leadership

Shenzhen Airlines following this strategy place emphasis on cost reduction in every

activity in the value chain. It is important to note that a company might be a cost leader

but that does not necessarily imply that the company’s products would have a low price.



In certain instances, Shenzhen Airlines can for instance charge an average price while

following the low cost leadership strategy and reinvest the extra profits into the business.

Other examples of companies following a cost leadership strategy include RyanAir, andeasyJet, in airlines.

Differentiation

When Shenzhen Airlines differentiates its products, it is often able to charge a premium

price for its products or services in the market. Some general examples of differentiation

include better service levels to customers, better product performance etc. in comparison

with the existing competitors.

Focus

Shenzhen Airlines can make use of the focus strategy by focusing on a specificniche in the market and offering specialised products for that niche. This is why the focus

strategy is also sometimes referred to as the niche strategy (Lynch, 2003). Therefore,competitive advantage can be achieved only in Shenzhen Airlines’ target segments by

employing the focus strategy. Shenzhen Airlines can make use of the cost leadership or

differentiation approach with regard to the focus strategy. In that, Shenzhen Airlinesusing the cost focus approach would aim for a cost advantage in its target segment only.

If Shenzhen Airlines is using the differentiation focus approach, it would aim for

differentiation in its target segment only, and not the overall market.

BCG Matrix



7.0 SELECTED MARKETING STRATEGIES (4 P’S)

Sichuan Airlines has relatively good strategy and marketing mix since they offer their

services in relation to their mission statement. However, they are few things I will

recommend which will help them to generate more income which are illustrated asfollows:

Product / Services

Their quality of service is not too fantastic, from the research carried and feedback fromthe users, most users complained that Sichuan Airlines does not follow the scheduling

hours of flight, which implies that customers are delayed for a period before traveling.

This shabby offering could damage their image and services as customers may seek for alternatives. If Sichuan Airlines should work on this, most unsatisfied customer could

return and customer will begin to speak of their satisfaction, which will improve their

brand image and generate more revenues at the end.

Price

It is true that Sichuan Airlines pricing form part their product. It will be fine for SichuanAirlines to maintain their lower fare-pricing model not to increase it in order to avoid

losing the target market they have fought to identify.

Pricing Strategies

a) Premium Pricing.



A company may use a high price where there is uniqueness about the product or

service. This approach can be used by Sichuan Airlines where a substantial

competitive advantage exists. Such high prices are charge for luxuries of flights.

b) Penetration Pricing.

The price can be charged by Sichuan Airlines for products and services which is set

artificially low in order to gain market share. Once this is achieved, the price is

increased.

c) Economy Pricing.

In this approach, the cost of marketing and manufacture can be kept at a minimum by

Sichuan Airlines. .

d) Optional Product Pricing.

Companies will attempt to increase the amount customer spend once they start to buy.

Optional 'extras' increase the overall price of the product or service. For exampleSichuan Airlines can charge for optional extras such as guaranteeing a window seat or

reserving a row of seats next to each other.

e) Promotional Pricing.

Pricing to promote a product is a very common application. There are many examplesof promotional pricing that can be used by Sichuan Airlines including approaches

such as BOGOF (Buy One Get One Free).

f) Value Pricing.

This approach can be used by Sichuan Airlines where external factors such asrecession or increased competition force companies to provide 'value' products and

services to retain sales.

Place/ Distribution

Sichuan Airlines has been thriving heavily lately. They have opened up branches in

different place in order to reach their target market. More destination and branches should

be opened to enable more and more customers to join the troupe and to serve the need of their target market

Promotion

More promotional activities should be engaged to attract more customers and to createawareness of their presence and what services they offer. It should be their task to

develop many advertising models to achieve this. This is another way of selling their

brand to the world.



8.0 IMPLEMENTATION

Sichuan Airlines intends to cut out new territory as it goes about marketing itself.

While it will clearly serve the target markets of Southeastern Europe and Turkey, it will just as clearly be a different kind of player on the field, and will seek to be known not

only as a Western airline, but at the cutting edge of the aviation business in Europe.

Sichuan Airlines’ emphasis on the latest information and electronic technology,

and its stress on comfort, convenience, safety and customer service, will be cornerstones

on which the marketing strategy will be built.

Sichuan Airlines will utilize a combination of methods to achieve the recognition

that it both desires and needs. A fairly large advertising budget is planned to buy the

space and time to get its name and message in front of the largest possible group of

potential customers that it can.

Sichuan Airlines will also utilize public relations to good advantage to extend andsupplement its advertising budget.

9.0 BUDGET

The current budget and controlling processes (what is measured when and where)

and analyze the cash flow (monthly, quarterly) with a focus on:

• monthly cash requirement (forecast)

• existing debt in detail and develop a priority list

• accounts payable with all important suppliers• accounts receivable

• excess inventories (engines, rotables, spare parts)

• cash collection process

On the other hand, a critical financial situation arises with performance

irregularities. Thus, the performance data will be analyzed with a focus on operational

and service indicators (e.g. punctuality, reliability, customer satisfaction, etc.) and shortterm improvement actions will be defined.

10.0 CONCLUSION

Sichuan Airlines business model has been analyzed in conjunction with themarketing mix that is employed to identify its target Market Sichuan Airlines’ philosophy

of low fares is aimed to make flying affordable for everyone. Sichuan Airlines also aims

at making travel easy, convenient and fun for its guests. Their philosophy is vital inshaping Sichuan Airlines marketing mix. Their services and their pricing work together



to identify their target market, however, their promotional activities and their

distributional channel is aggressive developed, planned, and executed to target both

foreigners and locals alike. Moreover, more advertising model should be developed andSzechuan Airlines needs to identify more suitable areas for distribution as more and more

loss potential target could be captured which will at end generate huge revenue for

Sichuan Airlines.

REFERENCES

Phillip Kotler and Gary Armstrong, Principles of Marketing, 9th ed. (Upper Saddle

River, NJ:Prentice Hall, 2001), p.245.

Shaw, Stephen, Airline Marketing and Management , (Malabar : Krieger , 1988,

c1985).

Tarry, Chris, "Time to Break the Cycle," Airline Business, June 2000: 95-96

Butler, G.F., Keller, M.R. (2000): Handbook of Airline Operations. Aviation Week;

McGraw-Hill Companies

Doganis, R. (2002): Flying off Course: The Economics of International Airlines, 3rd

edition. Routledge, New York.

Directory: (2007): World Airlines", Flight International, 2007-04-03, p. 77.

Doganis, R. (2001): The Airline Business in the 21st Century. Routledge, New York,

Smith, M. J. (2002): The airline encyclopaedia, 1909-2000. Scarecrow Press

Morrison S. and Winston C. (1997): The fare skies: air transportation and Middle

America, Brookings Fall

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