Business Ananlysis and Design

Garuda Indonesia has been chosen as the basis of discussion for this report. Although it is the best airline for domestic routes, Indonesian passengers have low confidence in Garuda Indonesia (GIA) for international routes. The purpose of this report is to present a prominent business strategy to escalate GIA's performance and image, aiming to achieve the 5 stars Skytrax rating by 2014.

Several analyses were conducted meticulously to determine an appropriate strategy. Discussions on the external analysis (PESTEL, five forces framework and competitor analysis) and internal analysis (value chain, SWOT analysis and culture) within GIA itself are included in this report. The report presents a hybrid of differentiation and cost-leadership strategies for GIA.

Key findings of this report from the external analysis are government and industry regulations, fuel prices and operation costs. The critical success factors for an airline company are safety reputation, air fleet technology improvement and brand name.

From the internal analysis, we found that using technology appropriately is effective in increasing the efficiency of the organisation's operations through cost efficiency and quality performance.

The recommended strategic option is to adopt a hybrid strategy which provides the level of quality that the industry leaders provide but at a lower cost in order to give more value in order to attract more customers worldwide.

2 Introduction

In the early independence era of Indonesia, during the late 1940s, Garuda Indonesia emerged as the first government-owned commercial airlines serving the country. 26 January 1949 was officially recognised as the airline's establishment date, which at that time was known as 'Garuda Indonesian Airways' (GIA) (Garuda Indonesia, 2011e). As the flag carrier of Indonesia, GIA has an intertwined history with national struggle. It was realised by the first government of Indonesia that the national airline became an immediate necessity once the Independence Day of Indonesia was declared. The national airline was anticipated to serve the Indonesian public and to support diplomatic missions during the Indonesian revolution.

GIA operates as a full service airline, distinguished from its budget airline competitors. During the 1980s, it was awarded the most prestigious airline in Asia, owning one of the biggest fleet in the region. However in the 1990s GIA started experiencing a grave downfall due to two major accidents occurred in Fukuoka, Japan and Medan, North Sumatra and followed by the 1997 Asian financial crisis. As a result, several unprofitable routes were discontinued. Numerous incidents also contributed to GIA's downturn such as the Bali bombings in Indonesia, the 2004 tsunami in Asia, and the SARS epidemic. The situation worsened when the European Union (EU) banned GIA from flying to European countries in 2007 (Clark, 2007). In 2009, the ban was lifted and GIA began work on a five year expansion plan. During this expansion period, GIA was awarded the prestigious four star airlines rating by SKYTRAX, and "World's most improved airline" in 2010, which beacons the awakening of GIA (Skytrax, 2010). In 2010, GIA launched a new service concept - the Garuda Indonesia Experience, aiming to deliver authentic Indonesian hospitality to all its passengers. GIA and its fleet of 83 aircraft currently operate 93000 annual flights to a total of 50 destinations domestically and internationally.

The business analysis undertaken is in response to GIA's five year expansion plan and how it will tackle the issue of tarnished views that the public holds towards GIA. Under those findings, several approaches will be considered in order to improve GIA's business activities, sharpen its focus on its core public service mission, to increase the value of resources used, and to fulfil its commitments to society. These assessments will help underpin the pursuit of selecting the most appropriate business strategy choices for GIA.

3 Strategic Analysis

3.1 Methods

This report is based on data which are collected from secondary sources such as search engines (www.google.com) to get the latest news regarding the industry and airlines; Deakin library website (http://www.deakin.edu.au/library/) and electronic databases such as Emerald, Ebscohost, Proquest, and Business Source Premier to get industry reports and previous researches regarding the airline industry; and airline companies' websites such as Garuda Indonesia Airlines (www.garuda-indonesia.com), Malaysia Airlines (www.malaysiaairlines.com) and Vietnam Airlines (www.vietnamairlines.com). The information gathered was then used in conjunction with theories from the unit's (Business Strategy and Analysis) textbook- Exploring Strategy Text and Cases 9th edition- to analyse the company and its industry and to propose an optimal generic strategy for the business.

3.2 Business Strategy Statement

GIA's mission is to be the flag carrier of Indonesia that promotes Indonesia to the world and support national economic development by delivering professional air travel services.

GIA's vision is to become a strong distinguished airline that provides good quality services to people around the world via Indonesian hospitality (Munir, Prasetyo & Kurnia, 2011). This means that GIA must have good reputation, must be highly regarded and respected, and have an impressive safety level and service quality record apart from becoming a gainful company with a high operating profit margin.

Pleasant and quality services must also be GIA's natural character in its push to achieve recognition by gaining a five-star ranking from Skytrax. GIA has an advantage in this area as it has plenty of human resources who are trained to provide the best Indonesian hospitality to customers. Furthermore, GIA aims to provide flights to routes covering five continents whether by flying on its own or by code-sharing with other airline companies.

Besides its vision and mission, GIA's corporate objectives are to create sustainable growth, reinvent and boost its image, and achieve financial profitability.

GIA covers both domestic and international routes. As the biggest airline company in Indonesia, GIA covers most places in Indonesia. Internationally, it covers South East Asia (Bangkok, Hongkong, Kuala Lumpur, Singapore), North Asia (Tokyo, Nagoya, Osaka, Seoul, Guangzhou, Beijing, Shanghai), South West Pacific (Melbourne, Sydney, Perth), Middle East (Jeddah, Riyadh, Dammam, Dubai) and Europe (Amsterdam) and plans to fly to more countries as well in the near future.

In summary,