Lesson 5
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Questions?
Assignment
Strategy in practice:
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Strategic plan
Analyses Level
Length of plan
SWOT analyses
assignment
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Assignment of lesson 4
Assignment - Case Airline Companies
The landscape in transporting passengers by air has significantly changed
during the last decade. Companies like RyanAir, Easy Jet and Air Berlin
grew like mushrooms against the traditional Airline companies, such as
Lufthansa, KLM, Air-France, Air India and British Airways.
Prepare for the next lesson:
- Description of strategy (mission, vision, values)
- Description of Five forces in this branch
- Description of chosen Basic Strategies (Porter generic strategies)
- Present the findings in a Pecha Kucha style presentation (20 slides are shown
for 20 seconds each)
Of an airline company at your own choice:
British Airways – KLM – Lufthansa - Cathy Pacific Airlines – Emirates - Garduda Airlines – Singapore
Airlines - Qatar Airlines - Thai Airways - Air Asia - Air India – EasyJet - Air Berlin
Each group a different airline please
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Assignment of lesson 4
KLM – Royal Dutch Airline Company
Revenue and income :In financial 2009-2010 the KLM Group carried 20.7 million passengers and
473,000 tonnes of freight. Income in this year was 7.4 billion euros. KLM Group incurred a loss of
383 million euros.
Employees: On 31 March 2010, KLM had 31,787 employees.
Technical maintenance: KLM Engineering & Maintenance is largest aircraft manufacturer in the
Netherlands, employing around 5,000 technical staff. KLM E&M and Air France Industries (AFI)
jointly carry out maintenance, repairs and modifications on aircraft, engines, and components for the
AIR FRANCE KLM fleet and various other airlines worldwide.
Fleet composition: The KLM Group fleet comprises 205 aircraft with an average age of 11 years.
Destinations: KLM expanded its network from Schiphol in 2009-2010 by reopening two routes –
Aruba and Denpasar (Bali) – and adding a new destination: Calgary. With this expansion and
certain adjustments, the number of direct routes offered by KLM (and its partners) from Amsterdam
was 72 intercontinental destinations and 79 European destinations. At the beginning of financial
2010-2011 the new destination Hangzhou, China, was added to the network.
Homebase and global hub: Amsterdam Airport Schiphol
Promise: Fly Blue, means comfortable, in time and solid
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Assignment of lesson 4
KLM – Royal Dutch Airline Company
Description of strategy – Mission
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With Air France, KLM is at the forefront of the European airline industry. Offering reliability
and a healthy dose of Dutch pragmatism, 32,000 KLM employees work to provide
innovative products for our customers and a safe, efficient, service-oriented operation
with a proactive focus on sustainability. KLM strives to achieve profitable growth that
contributes to both its own corporate aims and to economic and social development.
KLM works to create sustainable growth at Schiphol, to gain access to any market that
will increase the quality its network and to maintain a level playing field for all industry
players. It also works to ensure a balance between the company’s interests and those of
the people living and working close to the airport.
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Assignment of lesson 4
KLM – Royal Dutch Airline Company
Description of strategy - Vision
KLM wants to be at the front of the industry by being smarter than the rest. By
merging with Air France KLM has come to occupy a leading position in the
international airline industry. KLM wants to be the customers’ first choice, to be
an attractive employer for its staff and, a company that grows profitably for its
shareholders. With smart partnerships and pioneering new destinations, KLM
offers global access through its extensive network. By responding to market
opportunities and technological developments, KLM offers customers a
contemporary product.
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Assignment of lesson 4
KLM – Royal Dutch Airline Company
Description of strategy – Values
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Customer focus:Both the modern traveller and freight companies require as much flexibility as possible
and a wide range of choices. The strong transfer product offered by KLM at Schiphol airport is the
foundation of a high-quality network of direct European and intercontinental connections for
passengers and cargo. KLM’s customer-oriented service is evidence of its pragmatic and
entrepreneurial Dutch spirit. KLM focuses on the individual behind the customer, because KLM
understands that every customer is different.
In the KLM Group there are 32,000 people making a difference. Availability is central to our personnel
policy. KLM wants its employees be healthy and to enjoy working as long as possible for the group.
This is why we pay attention to their health and development. There are fitness centres in departments
where heavy work is carried out and healthy eating is the main concern of the staff restaurants. Staff
are also encouraged to expand their skills and experience through training and changing jobs from
time to time.
Rapid changes in technology and customer markets demand that KLM is able to adapt its organisation
flexibly. This flexibility is also expected of individual employees.
Corporate Social Responsibility - KLM has taken the initiative for Corporate Social Responsibility
(CSR) in the airline sector. CSR is more than just a label for KLM. KLM and Air France together want
to set the standard for an integrated approach in the airline sector. The CSR policy is directed at
customers, employees and society. By signing the United Nation’s Global Compact, KLM has
contributed to the UN Millennium Development Goals. In 2010, AIR FRANCE KLM was placed top of
the Dow Jones Sustainability Indexes sector Airlines for the sixth consecutive year. AIR FRANCE KLM
is also Global Supersector Leader in the umbrella category Travel & Leisure.
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Assignment of lesson 4
KLM – Royal Dutch Airline Company
Description of Five forces in this branch
1. Suppliers – KLM has much negotiating power on supplier, except from
producers of aeroplanes – there are few – but also national political interests
and labour is here at stake. LM is dependent on admissions for landing. Here is
also international politics at stake. Price of fuel influences directly the costprice
and consumers price.
2. Customers – because of entrance new low budget airlines, clients decide easily
on price. There are too many aerocrafts and too many airline companies so that
negotiating on price is possible
3. Newcomers – the last 10 years a number of low cost airlines have entered the
market with enormous impact on price and service. On long distant flights
competition grows from existing companies but price is under pressure
4. Substitutes – on continent and relative short trips the fast train is a substitute.
5. Internal segment – there are too many airline companies and too many chairs
to be sold. Countries are supporting their national airline industries.
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Assignment of lesson 4
KLM – Royal Dutch Airline Company
• Description of chosen Basic Strategies
Differentiation:
– distinctive proposition
– Altough customers are price-orientated they prepare to pay extra for
offered concept (difference between business and personal
travellers)
- Products are difficult to copy (destinations)
- Loyalty program stimulates travellers to fly KLM
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Strategy in Practice
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Objectives of business strategy
• In its strategic plans, a company tries to build pictures of its
future. It tries to register as much information as it can by
assessing all known information sources such as:
– Market scans
– Competitive scans
– Trends in society and technology
• Once complete, the internal and external analysis is used
for creating a long-term game plan (strategy plan).
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The scope of the plan
Scope – question:
• How wide do you cast your net to get the best plan?
• There is no final answer. Advice is: first cast it as wide as
you can, for the connected enterprise.
• Pick up any information you can find to predict your future
environment.
• Then focus, and eliminate what you deem is irrelevant.
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The Level of Analysis
• Level at which a company analyses and writes its plans:
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Corporate
Divisional
Business Unit
Market/Product Group
• Level of analysis should always match
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Time-Line of the Plan
• Some companies only do a new strategy plan once every
3-5 years. Others take a 30-year horizon. Some internet
companies do a new version of their strategy plan every
quarter (…or don’t really have a strategy plan in their
drawers)
• Think what would be major internal and external reasons
for a company to plan 30 years ahead, or for 3 months
only?
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Analytical cycle
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Collect/select information
Analyse
-Do
Decide
Execute
- Act
Evaluate
- Check
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SWOT
• SWOT (Strengths, Weaknesses, Opportunities, Threats)
are used to create snapshot pictures of a company and its
environment: internally (S-W) and externally (O-T).
• Often, strengths are diagonally connected to opportunities,
and threats to weaknesses
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SWOT table
INTERNAL
EXTERNAL
Strengths
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Weaknesses
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Opportunities
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Threats
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Internal – 5xP or 7xS
5xP:
Product
Price
Promotion
Place
People
7xS model of Mc Kinsey:
analyses the internal aspects of the company, which
you can influence yourself.
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External - DEPEST Analysis
DEPEST:
Demographics,
Ecological,
Politics,
Economics,
Sociology and
Trends
analyses the environment of the company. It casts a
wide net to capture recent developments.
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Excercise SWOT
Statements:
1. The population in EU is greying.
2. Our large marketshare gives us an advantage in
setting prices.
3. The market is growing faster than we can supply.
4. Our staff belongs to the best educated in our branch.
5. Our turnover has increased with 3% but our net profit
decreased with 6%.
6. The large demand of steel by China and India are the
reason of the high prices of steel.
Define the status of the statement in terms of the SWOT
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End of lesson 5
Homework for next time:
- Read chapter four of handbook PBMA
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