Making a strategic paper is never easy. There’s hard work, sleepless nights, and sometimes inevitable argument among the group. But what makes it fulfilling is the fact that there are people around who, without thinking twice are willing to lend their hands.
To Mr. Sofronio “Toti” Dulay , our beloved adviser, for the unwavering support, guidance, and patience he has shown.
To our families for their love, provisions, support, and understanding before, during, and after the research process.
And to God Almighty for providing the researchers with amazing grace and wisdom that only He can give, for His provisions and heavenly guidance from the beginning up to the very end. for His unfathomable and overflowing love that helped us surpass all the challenges that came our way.
With the abovementioned names, the group would like to extend the utmost gratitude with all our hearts. May God bless us all!
I. Executive Summary
Philippine Air Lines also known as PAL, is the flag carrier and national airline of the Philippines, headquartered in the Philippine National Bank Financial Center in Pasay City. Philippine Airlines maintains aircraft with the highest degree of airworthiness, reliability and presentability in the most cost-effective manner; and conduct and maintain safe, reliable and cost-effective flight. It continues to achieve on-time performance on all flights it operates, as well as providing safe, on time, quality and cost effective in flight service for total passenger satisfaction.
The Philippines Airlines offers services at reasonable, competitive prices, and at the highest level of quality consistent with such prices. It meets the needs of the public for moving people, goods, information, and in particular for safe and reliable travel, transport, communication, distribution, and related services. The company’s products and services is the core company’s strength since these are what they mainly offer and, in return, where the company generates its profit. On the other hand, the decline in the number of the passengers carried placed the major weakness of PAL since the passengers are relevant to the revenue the company could earn.
The Philippines has high levels of economic, political and financial system risk. This impressive result continues the encouraging and positive trend reflects the Philippines Government’s impressive efforts on fiscal management. Also, the public and international confidence will strengthen further and provide confidence to the international investors that there is no economic risk of doing business in Philippines.
Philippine Airlines is performing well above average in the Philippine airline industry. It significantly indicates that the company has a strong internal position. This means that PAL has an above-average-ability to respond to external factors that could affect the operations of the company. Also, PAL has a strong competitive position in the market with rapid growth thus; it needs to use its internal strengths, take advantage of external opportunities, overcome internal weaknesses, and avoid external threats to develop a market penetration and market development strategy. This can include product development, integration with other companies, and acquisition of competitors. On the other hand, PAL still has to improve itself with regards to the critical success factors.
In order for the Philippine airlines to hold and maintain its position in the industry the company should pursue strategies focused on increasing market penetration and product development. It should also maximize revenue gener
E. Quantitative Strategic Planning Matrix (QSPM)
Based on the result, among the three strategies Market Penetration is the most attractive strategy followed by Product Development and Market Development respectively.
PAL should concentrate penetrating the market which has a Total Attractiveness Score (TAS) of 3.34. It is recommended that they continue with their present strategies and should intensify promotional efforts, since the company is behind as compared to its primary competitor, CEBU Pacific. Product Development should also be considered which has a score of 2.99. This may be done by acquisition of new fleet or by continuously enhancing and refurbishing the current fleet and facilities.
D. Grand Strategy Matrix
In this matrix, PAL is located in Quadrant I which means that the company is experiencing a rapid market growth and strong competitive position. This indicates that the company is in an excellent strategic position.
On the x-axis of the IE matrix, PAL has an IFE weighted factor of the 2.73 which falls on the average internal position having a range of 2.0 to 2.99. On the y-axis, PAL has an EFE total weighted score of 2.88 that falls on the medium part which ranges from 2.0 to 2.99. Philippine Airlines falls on region 5. This means that they should either hold on to their current position or grasp an opportunity to grow. The most effective way to do such is though market penetration and product development strategies. Specific product development action that could be done by PAL may include service quality development and including more amenities such as freebies that will be given to the passengers. On the other hand, market penetration can be done thru stringent and effective marketing efforts which may include sponsorships, event organization and different forms of advertisement in different media such as televisions, radios and print ads.
B. BCG Matrix
Provided in the above Boston Consulting Group (BCG) Matrix are the major division of Philippine Airlines namely, the Transpacific routed destinations, flights to Asia and Australia, and flights to domestic destinations. Revenues generated from such includes revenues from both passenger and cargo shipments. The following are classified according to how these divisions perform in comparison with their competitors from the Philippines, the market share and potential market growth being taken into consideration.
Classified in the STAR category are the flights to Asia and Australia and flights along the transpacific route. The following divisions generated the biggest portion of PAL’s revenue in the current year, roughly amounting to 77.8% of PAL’s revenue (32.6% being from the transpacific routes and 45.2% from the flights to and from Asia and Australia). Compared to their competitors, PAL has the largest number of international destinations making their market share for the said division relatively high. Also, with growing number of Filipinos who seek employment abroad, along with the booming Philippine tourism, the said division possesses a high potential for market growth which can be realized thru market penetration.
Classified in the CASH COW category are the Domestic flights Division. The said Division operates along 29 cities and towns in the Philippines and such operation generated about 22.2% of PAL’s total revenue for the year. In terms of the Philippine Market, PAL held 45.2% in the domestic market along with its competitors: Cebu Pacific, SEAIR, Zest Airways, etc. which greatly proves their huge share in the said market. In terms of its potential market growth, the domestic division of PAL and even its competitors are all eyeing a small opportunity to expand their domestic operations.
A. SPACE Matrix
Using the SPACE (Strategic Position and Action Evaluation) matrix assessment, PAL has positioned itself in the aggressive quadrant.
Being so, this means that the company is in an excellent position to apply its internal strengths to take advantage of external opportunities, overcome internal weaknesses, and avoid external threats.
Furthermore, its directional vector describes itself as a financially strong firm that has achieved major competing advantages in a growing and stable industry.
Based on the study conducted by the researchers, the following conclusions have been made:
1. In the IFE Matrix, which identifies its strengths and weaknesses and their respective importance to the company, PAL got a score of 2.73. This means that PAL is performing well above average in the Philippine airline industry. It significantly indicates that the company has a strong internal position.
2. In the EFE Matrix, which visualizes and prioritizes the opportunities and threats that a business is facing, PAL got a score of 2.88. This means that PAL has an above-average-ability to respond to external factors that could affect the operations of the company.
3. According to the CPM of different companies within the Philippine airline industry, PAL got a score of 3.44, which is slightly behind Cebu Pacific and way above SEAIR. This means that PAL has a strong position within the industry considering that it got a score above the average weighted score. On the other hand, PAL still has to improve itself with regards to the critical success factors listed because it only ranked second in the industry with Cebu Pacific as the first based on the total weighted scores taken.
4. In the SPACE Matrix, which determines what type of a strategy a company should undertake, PAL got an ES Average of-2.20, IS Average of 4.60, CA Average of -2.40 and FS Average of 4.00 which lead to Directional Vector Coordinates of +2.20 in the x-axis and+0.55 in the y-axis. After plotting the values in the matrix, it was concluded that PAL positioned itself in Quadrant I which suggests that the company should pursue an Aggressive Strategy. This means that PAL has a strong competitive position in the market with rapid growth thus, it needs to use its internal strengths, take advantage of external opportunities, overcome internal weaknesses, and avoid external threats to develop a market penetration and market development strategy. This can include product development, integration with other companies, and acquisition of competitors.
5. In the BCG Matrix, which determines what priorities should be given in the product portfolio of a business unit, it appeared that the Domestic Destination unit of PAL is a cash cow business unit. It suggests that this unit has a low market growth but with high market share. As a result, this unit can be used to support other business units so the company should make strategies to defend & maintain it. It needs to be managed for continued profit - so that it could continue to generate the strong cash flows that the company needs for its Stars which are in PAL’s case, the Transpacific Routes.
6. In the IE Matrix, which analyzes working conditions and strategic position of a business, PAL landed on region 5 which is included in the so-called group 2 of the matrix. This tells us that PAL should hold and maintain its position in the industry. The company should pursue strategies focused on increasing market penetration and product development.
7. Based on the results reflected on the different matrices mentioned, the researchers concluded that PAL could formulate its strategies by comparing 3 alternative actions namely market development, product development and market penetration. The QSPM, in turn, will provide an analytical method for comparing these feasible alternative actions for the company since it is used to determine the relative attractiveness of various strategies based on the extent to which key external and internal critical success factors are capitalized upon or improved. And based on the results of QSPM, market development strategy got a score of 2.53, product development strategy got 2.99 and market penetration strategy got 3.34. This lead to the conclusion that the company should develop market penetration strategies as it yield the highest score among the 3 strategies presented. PAL may also use product development strategies since it got the second highest score and it is way above the average score.