Financial Analysis

The most recent and economically crippling factor that has influenced the airline industry is the Global Financial Crisis (SGF)(Unguided, 2011). This presents a potential weakness or threat for Santa who may come to feel that their premium price for quality service is not enough to get the customers to fly with them. The number of people using airlines to fly to holiday destinations has increased due to economic growth Therefore, the market NAS expanded and new opportunities tort tourism have opened in previously frequented countries. How society is observed as it transmits to air travel has a great deal to do with September 1 1, 2001. As a result of this tragic event, the Judgments of the world have come increasingly profound to the background of passengers traveling on planes. It has shaped something of a undesirable perception for particular cultures and beliefs. This discourages people to travel with other passengers or airline, directly affects the airline industry (Reilly. N. J, 2010)

Technological

Technological developments have both created new opportunities as well as threats for the aviation industry. Development in information and communication technologies has enabled strong communication and has consequently provided customers with an alternative for frequent traveling, for example; Santa Frequent Flyer programs. Airlines are now able to expand their outreach directly to consumers through e-commerce. For example, airlines like Santa are able to introduce tickets travel through the use of technology (Thompson and Gamble, 2012).

Legal

The implementation of the carbon tax had a negative affect on the aviation industry, as the airlines could not absorb the higher cost of fuel. This meant to offset costs travelers would pay extra in ticket prices (Herald, 2011). Some governments provide subsidies that provide an unfair advantage and prices rower than market conditions which affects the functioning of airline industries directly and Global environmental policies regarding emissions and international route deregulation may affect airline operations in present as well as in future (Fulton. J, 2010). The aircraft’s emissions have a significantly high impact to the environment as they travel several kilometers above the surface of the earth. Aircraft emissions cause significant damage to the atmosphere (Opener et al. 2001). Noise pollution is another major environmental concern (“Aircraft Noise is Unhealthy’, 2008).

Porter’s five forces

In order to analyses the industrial environment of Santa Airlines and evaluate the nature of the competition faced by the company, the following analysis was carried out using Porter’s Five Force framework (Porter, 2008).

Competitive Rivalry

The competitive rivalry in airline industry has been increasing, especially through mergers, acquisitions and subsidiaries.

Santa established it’s low-cost airline Starters in 2003 creating a two-brand strategy. By having these “two brands” the Santa Group is able to assess different market opportunities and deploy the best product to tit the opportunity and specific market conditions this also creates a competitive advantage. New rivals nave emerged tolling the tootsies to Santa, such as Singapore Airlines and British Airways, and are threatening Santa’ market share in the no-frill, low-price trade by offering lower costs and attending customer service (Modular, 2010).

Entry Barriers

There are high barriers to enter this industry, as it requires a large initial capital investment. In conjunction with the price wars and low profit margins, it has become difficult to make substantial profit. It is very common for airlines to project losses in their financial statements. Therefore a new entrant must be able to handle losses at the beginning. Another barrier to entry is the limited availability of landing slots in Australian airports. The slots are already reserved by established airlines and are difficult to obtain especially in airports with high passenger demand (Chem. 2008).

Threat of Substitutes

There are many substitutes in terms of long distance travel such as; cars, trains and cruise boats and these are generally cheaper. However, air travel has the absolute advantage in terms of time. Thus, the threat of substitute is relatively low.

Bargaining power of suppliers

Boeing and Airbus are the main aircraft suppliers for large airlines like Santa. Santa plans to spend capital investment worth around IIS$17 billion in more fuel efficient, next generation aircraft, such as the Airbus AWAY, Boeing 787 Adrenaline and Airbus AWAY neo (Santa, 2014).

Santa is heavily dependent on the price of oil for its profit margins, which implies high bargaining power of oil suppliers. Price hedging is limited and high rises in prices can manipulate Santa’ fuel costs. Due to he limited number of aircraft suppliers, and the continuous need for fuel, it can be said that the bargaining power of suppliers is quite high. (Thompson and Gamble, 2012).

Bargaining power of buyers

Consumers have high bargaining power with Santa, which is mainly attributed to their price based preference. Receiving the same service, the consumers will select the airline that offers them best value for their money. Due to the widely available information technology tools, such as Flight Center and Scanner, consumers have the ability to compare flight services and prices before making their final selection. Since the switching costs for customer is very low, the bargaining power of buyers is high.

Analysis

Santa gains its competitive advantage through its strategic capabilities that are gained from its resources and capabilities. It is through these, that the company can respond to its external environment and succeed. The airline industry is very competitive and as a result, profit margins are usually low. Also, the bargaining of the supplier is very high which undermines companies in the airline industry to exercise control over their supplier. With high entry cost, new competition into the international airline market is very low. Santa can continue to dominate this market while still competing with domestic market using the Frequent Flyer program to increase loyal customers.

Opportunities and Threats

By conducting both the PESTLE and Five Force analyses for the macro-environment we are able to determine a number of opportunities and threats that the aviation industry possess. Opportunities Threats Offers continual expansion opportunities for both leisure and business destinations Technology advances can result in cost savings, from more fuel efficient aircraft to ore automated processes on the ground Technology can also result in increased revenue due to customer-friendly service enhancements like inflict internet access and other value-added products for which a customer will pay extra A global economic downturn negatively affects leisure, optional travel, and business travel The price of fuel is not the greatest cost for many airlines. An upward spike can destabilize the business model Terrorist attacks anywhere in the world could negatively affect air travel Government intervention could result in new costly rules or new international competition

Resources and Capabilities

The following is an evaluation of Santa internal resources and capabilities.

Resources Capabilities

Airport locations/hangers Engineering facilities Trained personnel In-flight food (Neil Perry’s involvement) Santa lounges/restaurants Storage facilities for inventory, ranging from machinery to uniforms Training facilities for flight attendants and pilots New IT systems to promote more efficient operations including the evolution of e- tickets New development in cost effective service (e. G. Tit food, cutting costs on ingredients) New developments for the frequent flyer’ scheme to adapt to imitators’ similar concepts including the Chairman’s Lounge Fleet development: “The airline has been constantly growing since its inception as a result of increasing fleets. Santa has been purchasing Boeing aircraft makes like the 747-400. The availability of more aircrafts meant that the company can maintain schedules and meet maintenance needs of the old aircrafts (Santa, 2014). It is important to assess whether these resources and capabilities offer Santa sustainable competitive advantage, employing the BRIO framework can do this.

BRIO Framework applied to resources of Santa: Resource Valuable? Rarity? Inimitable? Organized? Implication tort competitive advantage In-flight-food Yes (first mover advantage) (other airlines can copy) Temporary Starters (expands customer base) (dominates the domestic airline industry) No (Virgin Blue is a similar model) Sustained Sanitation (only a few choices for regional areas) (costly) Santa Brand (strong) (size, strength, dominates the domestic market) (strong reputation, costly to imitate) (Dies, 2004) By applying the BRIO framework to Santa we can observe that not all resources sustain a competitive advantage.

Starters, Sanitation and the Santa brand in general re all strong resources that allow Santa to sustain their competitive advantage. However, from the aforementioned resources this competitive advantage for the Santa Group as a whole is unsustainable. From the analysis, Santa’ core competencies can be identified as their two-brand strategy, their diverse services and their reputation. 6. Issues The following is a list of weaknesses/ issues as identified by the SOOT framework:

1. Competitors
2. Higher labor and other operating costs than its competitors
3. The current strategies Santa include their low-cost carrier and the Frequent Flyer Program Cones, 2009)
4. Ongoing disputes between Santa management and militant unions
5. Speculation that British airways will quit its $1. 3 billion stake in Santa (Santa, Working Towards Our Vision, 2013)
6. Outdated IT systems.

Recommendations

To help reduce the affect of the aforementioned weaknesses Santa could: Attract customers through improved customer service Advertise in social media Engage employees and establish a better employee management system Adopt a corporate level strategy, which is the long-term direction of an organization (Porter, Smith, Bag), for Santa this will focus on cost reduction. Develop a business level strategy that focuses on the need for differentiation (Michael A. Hit, 2006). Focus should also be on the increased use of IT, to increase operational efficiency.

The important drivers of airline success in Asia is supported by government, most airlines in East and Southeast Asian countries had full or substantial state ownership, management, and control, often subsidized and protected by the governments from competition; with the pursuit of non-business goals, profits were often sacrificed for the sake of cantonal objectives. The political environment in South East Asia for low cost airlines is benign and countries are trying to attract investment in their airline sector.

The pressure is coming on to national governments because of high demand for services which was caused by the high annual GAP growth in the region. Some development countries like Manner, Vietnam and Cambodia, there are great enthusiasm among the government and regulators for inviting low cost airlines to operate, in order to connect the poorly served population as well as inbound tourists. In this environment, many new low-cost airlines have been set up in the increasingly liberalized regulatory environment.

The markets are also getting to be very complex and challenging with a host of new entrants.

• b) Economics Sais’s rapid economic growth and sprouting middle class continues to fuel the growth of air travel in Asia.

China, Japan and Indonesia had the largest number of air passengers in Asia in 2012 (as they have large populations which can afford air travel). The highest growth is comes from India because its large population with improving levels of income and affordability is undeserved currently.

Similarly, there is huge potential for Eurasia in the key South East Asian markets of Indonesia, the Philippines and Thailand, as they have high disposable income, and this directly leads to greater affordability of air travel

• c) Social-cultural Surveys revealed that more people were willing to compromise on food and other services in exchange for lower prices.

In fact, it was stated that price of tickets was the single most important consideration that influenced passengers’ decisions and of course this included without having to compromise on safety and punctuality.

In edition, increasingly over the years cost conscious leisure and business passengers were also looking to make their budge TTS decrease turner. This presents an opportunity for all Laces to increase their revenues by offering traveling at a much lower fare.

E) Technological Eurasia achieved a first mover advantage, by being Sais’s fist airlines to actually provide e-tickets rather than physical tickets. Furthermore, high sales of e-tickets on the website has eliminated consumer’s complex and expensive requirement to go through reservation systems that they would need before buying physical tickets.

In edition, e-commence and internet-based activities (such as online holiday and hotel reservations) are other areas where Eurasia can derived ancillary revenues from. Better still, technology advancements also means having opportunities to reduce operation costs, however, amidst these benefits and cost saving, Eurasia must be mindful that system disruption due to heavily reliance on online sales can pose serious threat to the company if they did not back up their maintenance systems.

Micro Industry Environment analysis There are several forces in Raisin’s external but controllable environment (micro- external) that actually affect their operation.

They are analyses using Potter’s 5 Force model as described below

• a) Bargaining Power of Buyers Air Asia faces intense competition with other low cost carriers in the airline industry. For instance, customer’s switching costs from one airline industry is really low. Furthermore, customers always compare prices and service offerings of several budget airlines.

All this proves that customers have high bargaining power. Air Asia has to provide special values that differentiate from competitors.

• b) Bargaining Power of Suppliers Fuel and aircraft companies are the main suppliers of airline industry. They are always doing completion among themselves; as a result the bargaining power of supplier is low. The supplier has an upper hand (high power) due to limited number of suppliers (only Boeing and Airbus).
• c) Threat of New Entrants Threat of new entrants is moderately low as the entry into the industry requires high capital.

Moreover, the industry is also highly regulated since every potential entrant is required to obtain approval from the civil aviation authority of the particular entry before the company is allowed to be operated. In the South-East airline industry, there are high barriers to entry but Air Asia still faces severe threat from new entrants entering the market place. For instance the government sets particular restrictions to airplane operators such as air service agreements.

Additionally, operating in the airlines industry requires the use of expensive capital that is really difficult to possess in the first place. The Asian government has been involved with deregulation and there has been rapid growth in demand for low cost carriers amongst budget travelers. Hereby, Air Asia faces intense competition from both alternative low-cost carriers and dull service airlines that launch De their own budget airlines in the industry.

Threat of Substitute Products

The possibility threat of substitutes is moderately low; since there are several other substitutes such as cruises, rails, buses and cars. Reiterate is fastest and more convenient than cruise. Eurasia faces very low threat from substitute modes of transportation because their main markets are countries in South-East Asia. But in mommies Malaysia, the threats from substitute

• d) Intensity of Rivalry Industry rivalry is moderately high due to competition and high exit cost.

Nonetheless, market participants understand and realizes that price war is destructive for them and thus they tend to avoid direct price competition to make themselves friendly competitors. Competition in airlines industry is very high, we can see that, if the airlines company low their ticket price, other airlines also do the same things, even for sales promotion Dave discount some attitudes have seen.

Opportunities Threats

High growth in the airline traffic presents the opportunity to increase business regionally.

Appropriation and deregulation suggests more opportunities to expand market and increase market share. Surveys showed a change in people’s preferences, I,e, more people are willing to compromise on food and other services in exchange for lower prices. The existence of a large pool of low income passengers who were no longer able to afford or Justify air travel on full-service carriers. Increasingly cost conscious business passengers also looking to make their travel gadgets go further.

Larger working age population; more disposable income. New services such as Internet Telephony provide all LLC with the opportunity to leverage on new technologies to increase sales. Technology advancements provide opportunities to reduce operation costs. Full service airlines start cut costs to compete. Entrance of other Laces. High fuel price decreases yield. Accident, terrorist attack and disaster that affect customers’ confidence. Aviation regulation and government policy. System disruption due to heavily reliance on online sales.

Financial and Accounting Analysis.

• a) Liquidity ratio

Looking at the table below one will notice that the liquidity position of the company is deteriorating. The current ratio has declined from 1.05:1 to 0.94:1. This is far below a recommended ratio of 2:1 for companies to be in a good position. The current ratio is an indication of the ability of the firm to pay its short term current obligation with less difficulty. In the year 2005, it means for every dollar of debt there are 0.94 dollars of assets. This cannot cover all the liabilities for the company. And unfortunately, this includes stock which cannot be disposed of with ease. Creditors consider current assets as a buffer for current liabilities and hence they prefer high ratios.  The acid test ratio also declined from 1.03:1 to 0.9:1. This is also a decline in the performance of the company in terms of meeting short-term liquidity position. However, this uses the most liquid assets of the company. In brief, the quick ratio shows that the liquidity position of the firm has gone down in terms of the ability to meet short-term obligations. The cash ratio is another ratio that can be used to determine the position in paying short term liabilities and in this case it stands at 0.92:1 and 0.72:1 for years 2004 and 2005 respectively. There is also a decline in this ratio. The reason may be due to the fact that the company invested more in investment securities.

Activity ratios

The ratio calculated here includes inventory turnover ratio, days sales inventory, receivables turnover, days sales in receivables, and asset turnover. The company turned the inventory 126 times in 2004 and 109.7 in the year 2005. This is a better performance in the year 2004 but deteriorated in the year 2005 if converted into days it shows that on average 3 days in the year 2004 and four days in the year 2005. It means the management declined its efficiency in selling its stock from 3 to 4 days. The overall conversion period shows a decline therefore the management should maintain a base as it is more than the previous year. Looking at the converting debt to cash we find that the company converted sales into cash 34.2 times in the year 2004 and 26 times in the year 2005. Converting this into the number of days to collect cash from the number of sales it was 11 days and 14 days for the years 2004 and 2005 respectively. This is again a failure by the management to improve its efficiency in utilizing its state to generate cash. The higher turnover shows that management is having some problems in trying to manage her resources. Utilizing total assets to generate revenue to the company turned the assets 0.45 times in the year 2004 and at the same time 0.51 in the year 2005. This is far much less than expected because the turnover on assets measures the business ability to utilize assets to generate high returns. It measures how the dollar invested in assets is turned. In every dollar invested in the year 2005, there is 0.51dollar of assets.

The PESTEL framework is designed to provide managers with an analytical tool to identify different macro-environmental factors that may affect business strategies, and to assess how different environmental factors may influence business performance now and in the future. The PESTEL Framework includes six types of important environmental influences: political, economic, social, technological, environmental and legal. These factors should not be seen as independent factors. Factors such as technological advances may probably affect the social and economic conditions in different markets.

Below, some characteristics in each environmental factor are listed, which may give business managers guidance to, which factors may be of importance to a company’s strategy. The list is however far from complete, and it only gives managers some preliminary inspiration to, which factors may be of relevance for handling business strategies. Many factors, that are not included below, may have an effect on business success, and each company must evaluate for themselves, which key drivers of change will potentially have strategic and competitive consequences.

Political factors:

• Stability of government
• Social policies: (e. g. social welfare etc. )
• Trade regulations: (e. g. the EU ; NAFTA)
• Tax policies
•  Entry mode regulations

Economic factors :

• Disposable income of buyers
• Credit accessibility
• Unemployment rates
• Interest rates

Inflation Social Factors :

• Population demographics (e. g. aging population)
• Distribution of Wealth
• Changes in lifestyles and trends
• Educational levels

Technological factors:

• New innovations and discoveries
• Pace of technological innovations and advances
• Pace of technological obsolescence
• New technological platforms (e. g. VHS and DVD) Environmental factors
• Environmental protection laws
• Waste disposal laws
• Energy consumption regulation
• Popular attitude towards the environment

Legal factors:

• Employment regulations
• Competitive regulations
• Health and safety regulations
• Product regulations

The key for business managers is therefore to discover the main drivers of change that may affect business strategies, and to discover the factors most likely to influence the performance of the business. In conducting a PESTEL analysis, business managers may create strategies that take several macro-environmental factors into consideration, so that the strategy formulation process will be as sensitive to current and future environmental factors as possible.

The purpose of this document is towards the center of attention on the matter of proton within conditions of confronting dissimilar quandaries within the Malaysia as well as worldwide automotive business eloped region. Malaysia is mainly a traveler concern market and the trade is well thought-out as a national market- directed.

The most important cause why traveler concern market is well-known PEST Analysis of Proton By Asseverating within the nation is tort the reason that to the atlantics posit ion to the nation (wry. Proton. Com).

Company History

It all started in 1979. Malaysia’s Minister of Modernization, Tuna Mathis Mohammad, debated the thought of launching an automotive gathering as well as developed business in our nation. On May 7, 1983, the vision was rewarded after PROTON was formally integrated (wanton. Com). Furthermore, on July 9, 1985, their initial replica, the Proton Saga was commercially begun.

In the beginning, every one of the mechanisms of the vehicle was totally man-made through Mediumistic, but the local element has been able to be used, as technologies were transported as well as capacities were enlarged (Frost ; Sullivan 2002). The symbol of the vehicle was distorted as of the Malaysia’s coat of arms as well as a fourteen-pointed star to a stylized tiger head. It represents PROTON’s administration method as well as industry term, even as its potency is replicated in each and every PROTON products (Histologist. N. D).

Products and Services

They created their 1 millionth car in the year 1996. This accomplishment was marketed through more than a few important novel replica begins consist of the Proton Tiara, Proton Wire 2. 0 Diesel as well as the two-door Proton Putter, additionally to their obtaining arrangement of the Proton Wire, Proton Austria as well as Proton Operand. In the next ten years, they continue to plan and produce an innovative variety of replicas consist of the Proton Was, Proton Jaguar, Proton Arena, Proton Gene 2, Proton Savvy, Proton Persona

This includes the analysis of political environment, economic environment, social environment and technology environment. Since Marriott International, Inc. Is the organization, which is given the service on hospitality such as the accommodation and restaurant. It has network around the world and its market-growing rate depends on the demand of customers in using service. Then, external environment is the factor that must be analyze and pay much attention to be able to exist on this competitive world. From now, it will be the environment that Marriott International, Inc. Must think of.

Political Environment Marriott International, Inc. Old not be successful, well-known, and reliable if Marriott din?¬wet bring laws and regulation to an analysis in strategy. The political in each countries has affected differently to Marriott. For example, some countries has the policy on health and the way the Marriott has non-fat foods and non-smoking room services, which is the same way with those policy. It affects Marriott in the good way. Some countries has policy on supporting the travel, this will support Marriott business as well. But if some countries has the protest like in Thailand ?¬” it affect to

Marriott business in the bad way. Because of the unstable political, the foreigners afraid to visit those countries where there is a protest Economic Environment The growing rate in economic that increase in the foreign countries, has bring Marriott come to more invest in foreign countries. High gasoline price has affected to Marriott to stop the production in Synthetic Fuel, which affect to the organization in loss. In addition, the different in currency between countries has affect to decrease in expenses of Marriott and bad in different currency rate in 2005.

Social Environment Nowadays people turns to interest in traveling more and more, also traveling in foreign countries; Europe, Asia, Africa, Australia, and America. To extend the network of Marriott to every country is the way to extend the business to increase the revenue in traveling, social, and culture that has different charming which attract traveler to visit. In the USA, the number of retired people has increased, so Marriott extends that Marriott Pest By nanas market to support these customers. Also the demand in nursery and house-work t as increased.

The demand of accommodation in medium and below level of customers has increased, so Marriott turns to make the business on medium rate hotel and save- accommodation to support that expand of this group of traveler. Increasing number of people turns to love health has good affects on free-fat food service, as well as the non-smoking room service. Technology Environment Presently, technology comes to has an important role in our life. Almost everyone in every society has access to the internet world. People want more convenience to communicate.

To be able to reserve the room or order the room on the internet has become a popular choice of people nowadays. Same as the service business, in this high competitive era, Marriott International, Inc. Has brought technology into the management into the organization; online reservation system, computerized ordering. Marriott?¬was website has developed to give the information of the hotel and network around the world and be able to make the reservation on the website from every parts of the world through the internet, including the payment service through the internet system.

Boeing Corporation is a major aerospace and Defense Corporation, founded by William Boeing 1916. Boeings headquarters are located in Chicago, Illinois, USA. Boeing is involved in the production of commercial airliners, military aircraft, munitions, space systems and computer services. Based on revenue Boeing is the largest aircraft manufacturer in the industry-Boeings stock is part of the Dow Jones Industrial Averages and Boeing is the largest exporter in the U. S.

Total revenue changed between 2005 -2006 increased by $6,685,000but also Cost of Goods Sold increased by $4,588,000 in 2006. So the Gross Profit by the end of 2006 increased by $2,097,000 . The main change in operating expenses was non-recurring expense that went from ($520,000,000) to $797,000,000 and also research and development increased by $1,052,000 due to these changes the operating income was lower than in 2005. Boeing co debt decreased by $413,000 at the end of 2006, so due to this the income before tax increased.

Expense from discontinued operations went from ($7000000) to $9000000 , and in 2006 Boeing decreased their net income with no cost of affect of accounting changes that were previously incurred in 2005. Net income decreased by $357000000. Boeing does not hold preferred stock. All net income is distributed only to common stock holders or in retained earnings. Total current assets from 2005-2006 increased by $1,015,000. This was caused by increase in cash and cash equivalence, net receivables, inventory and other current assets.

Total assets decreased by $8,264,000 and were due to long term investments decreasing during 2006 property plant and equipment decreased. Other assets, on the such as good will and intangible assets increased. Accounts payable decreased by the end of 2006 and on the hand Boeing co. had other current liabilities that increased $5,706,000 due to that total current liabilities increased only $1,513,000. In 2006 Boeing did not have any deferred long term liability charges such as in 2006. Total liabilities’ at the end of 2006 decreased $1,944,000.

In 2006 common stock is the same as in 2005 and retained earning slightly increase.. In 2006 total stockholders equity decreased by $6,320,000 mainly due to the increase in a negative other stock holder equity figure.

Total cash flow from operating activities at the end of 2006 remained stable, but total cash flow from investing activities in 2006 increased by $3,088,000 mainly due to the change in other cash flows from investing activities that went from $1 ,590,000 to ($1,540,000).

Total cash flows from financing activities decreased by approximately $1bil due to decreasing sale purchase of stock.

The price earnings is the relationship between the stock price and the company’s earnings. P/E ratio gives an indication of future of earnings of a company. Boeing price earnings ratio is 17. 35 compared to the industry which is 18. 77 what this means is that the market value of each share would be (17. 35* $1)= $17. 35 the market value of each share f or the industry would be (18. 77*$1)=$18. 77

The market/book ratio is the ratio of the current share price to the book value per share. A company with higher market to book ratio is more likely to issue equity, because they have less external financing options but a low market to book ratio means that the company is profitable and will issue more debt. Market to book value is book value which is Total Assets -intangible assets-total liabilities The higher the ratio the company can better manage their short term debt obligations, which doesn’t mean that Boeing has difficulty meeting its current obligations.

Boeing borrowing funds provides financial flexibility; this was the same for 2006. Boeings quick ratio is much lower than the industry’s; increasing debt would not change this but worsen it. Boeings current ratio is 0. 8 which is 80 cents for every dollar of short term liabilities. Boeing may have a short-term asset problem. The problem may be due to high inventory or unproductive use of inventory; this is reflected in its turnover ratios which is considerably lower than the industry.