Operation management essay sample

Oman Air is the primary carrier of the Sultanate of Oman. It’s an enterprise that is committed to providing secure, reliable and suitable cost air transport services for passengers. Oman Air is also involved in providing other aviation services like maintenance, repair and overhaul. Oman Air is famous for its strong business presence in Oman. Moreover Oman Air is also respected by their customers due to their professional attitude and excellence in their services.

Since the time of its establishment, Oman Air as a national carrier has shown a rapid growth in its business. It is owned by the Government of Oman. The hub base of the air carrier is situated at Muscat International airport in the city of Muscat. The head office of the Oman Air is also present in the same city of the Muscat. The workforce of the Oman Air is dedicated and hard working. Oman Air has successfully built up their unique identity and customer base with the help of their excellent customer services.

Oman Air has also established partnerships with different carriers present all over the world. They have a special code share partnership with different carriers. With this code share partner, Oman Air is involved in frequent flyer program with these carriers. Presently Oman Air has created the niche of its own, which is hospitality and providing air travelling services both at the national and international level.

SWOT Analysis

The SWOT analysis of the Oman Air has shed the light on the strength weaknesses, opportunities and Threats of the company.

2. 1 Strengths:

Oman Air is considered to be a commercial airline . Oman Air is striving to show its excellent performance in all parts of its operations. The airline also provides extended services including cargo. Moreover the fleets of the airline are considered to be the most modern and fuel efficient aircraft. All these aircrafts of Oman Air are designed by Interiors. To provide safety and good performance Oman air has also used the flight service equipments. Their huge investments in modern technology and innovative services have made them superior in customer service parameters. The airline provides their customers products that are more convenient and efficient than the competitor services of any other airlines. All efforts are made to provide their customers a consistently enjoyable experience. Oman Air has achieved International status in terms of their quality and safety they provide to their customers by adopting ISO standards in their operations. All the departments of the airline are engaged in the uncompromising processes by providing valuable services.

Oman Air had been continuously winning the Best Business Class Airline Seat for the second year in a row. The event was conducted by Skytrax , at the World Airline Awards, Its Airbus A330 seats in Business class has won a number of accolades. In many other categories, Oman Air is continuously nominated and in few groups like Best First Class catering and Best Airline Staff service in the Middle East, the airline came runners-up. The airline has also won accolades for Best Business Class Airline lounge and Best Middle East airline.

Oman Air has more departments than most of the other regional airlines. This helps the airlines to focus more and create less burden for its employees. The top management of the Oman Air is diverse and the wide range of industry experience they bring, help the airlines operate smoothly. In recent years the Oman Air was awarded the most value for money airlines by IATA. The occupancy rates for the airline it to the tune of 72. 7% (Centre for Aviation, 2011). Moreover Oman Air is a profitable entity, as compared to other airlines in the region. The efficient operations scale of the airline helps in passing on lower fares to their customers. The airline encourages its employees to interact well with the customer and pay high importance to customer feedbacks. All the staffs of Oman Air are well trained and experienced. Employees of the airline work in the form of teams and ensure that their safety record is of the highest standards. Despite of the economic downturns the Oman Air has shown the tremendous growth due to the high propensity of air travel. Oman Air has the ability to segment the market even at different routes. This allows the Oman Air to provide different services and pricing at different routes.

2. 2 Weaknesses:

The one of the greatest weaknesses of the Oman Air is that the attention of the top management is divided between the Gulf Air and Oman Air. Because of the diversion of attention the future of the focusing on two separate entities simultaneously could lead to a dilution of their aims. Moreover in recent times the airline also needs the injection of the capital, in order to buy new aircrafts, expansion of their overall capacity, and hiring trained personnel. The Government, being the major stakeholder in this entity is more focused on Gulf Air, as it has been in the market for a longer period. Oman Air must bring about changes in their operations in order to grow.

Another great weakness that prevails in the air industry and is also prevalent in Oman Air is the problem of occupancy. Empty seats in the aircraft at the time of departure are causing loss of revenues.

The large workforce of the airline comprises of different nationalities and communications is an important parameter for the operations to run seamlessly. Oman Air needs to work on their communication channels. Another weakness is that the majority of the fleet of Oman Air comprises of Boeing aircraft. Over dependence on a single aircraft manufacturer could lead to trouble in case the manufacture performs poorly in terms of quality of product.

2. 3 Opportunities:

The growth in the market of the airlines has provided more opportunities of expansion for all destinations.

The latest advancements in technology have provided the various cost reduction solutions. The technological expertise available in their pool of manpower helps the airline in maintenance situations. Moreover Oman can boost up their revenues by providing more customers friendly services with the help of newer technologies. These customer friendly services will add the value of the offered products. A higher price charged to the customer can be justified when these facilities are in place for the customer.

Oman Air is working to increase their passenger volumes by building links with the other carriers. Through this link up they will able to provide their services to many other destinations by a process called code share agreement.

Source: CAPA – Centre for Aviation & Oman Air

The rising middle class of Oman also helps add impetus to the growth of the airlines. These new generations’ people are most likely to travel through air. Overall travelling through the air has increased since last decade. Moreover they should more focus on the use of the internet for their services like ticketing, holidays and etc. Oman Air can take full advantage of the market buoyancy. This can result in increased load factor for the airline.

2. 4 Threats:

Recent economic downfall has tremendously affected the travel of the people. Now people prefer to travel less frequently for leisure and business trips. The business model of the Oman Air will also get affected by the rise in the international fuel prices. The increase in the operational cost of the Oman Air due to increase in the fuel prices will reduce the revenue of the company.

The greatest threat of the Oman Air is from Gulf Air. As Gulf Air and Oman Air are providing the same type of services on the same routes, which include Indian subcontinent and Middle East, which are the largest markets of the airline.

A latest cost regulation by the government of Muscat on the high side is another threat for the national carrier. The cost of the travel by Oman Air will increase with time. Also, the introduction of high speed rail will also reduce the air travel for the medium length journey.

PEST Analysis of Oman Air

Every company conducts its PEST analysis before going through the marketing process. In fact the environmental factors have a continued impact on all types of planning. The organizational environment of Oman Air business is compromised of PEST analysis which consists of political, environmental, social and technological factors that are influencing a company marketing strategies. PEST analysis is an external factor analysis while doing the marketing research. It tells about the important factors that Oman Air must take into consideration while doing their marketing plan. The political factors include the government interventions, rules and regulations, Tax policies and tariff plans. The economical factors include the interest rate, economic conditions and the inflation rate. In social factors includes health, population, growth and cultures are taken into account. In technological factors it includes R&D, innovation and bringing technological changes.

(Source: Harvard Business School)

3. 1 Political Factors:

As Oman Air is backed by the government of Sultanate of Oman and has a great influence on the overall operations of the Oman Air. The government of Muscat has recapitalized the Oman Air. The airlines are also supported with some special tax treatment from government. Also the government has outlined some new regulations for increasing the intake of Omanis and hiring of the trained employees for the airline.

3. 2 Economical Factors:

Due to the latest downturn in the economy there is a decrease in the number of airline passengers recorded. People have less disposable income is available to spend on the leisure trips. Moreover the revenues of the most of the business have declined due to the recession in the economy that leads towards the less business trips are arranged by most of the companies. All these situations have reduced the volume of passengers. Moreover competition has increased in the low cost airline to a large extent. More alliances and acquisitions have taken place in the recent years due to consolidation. Many airlines are facing serious financial issues due to the economic downturn. In the same way the demand side of the airline industry is also facing a serious downturn. After the terrorist attack people are reluctant to travel by air. There is a need of developing a confidence to regain the market.

3. 3 Social Factors:

Travelling by air is considered to be a norm especially in business trips and it is expected that this norm will remain continue in the near future. All biggest business likes to send their employees on business tours by air. This is because the journey time through air travel gets reduced to a larger extent. As Oman Air is providing the services are provided at both national and international level, there is a great need for Oman Air to become bilingual.

3. 4 Technological Factors:

The tremendous increase in the use of the internet has provided many opportunities for the airlines. For example, they can introduce a service in which they can conduct an online auction of the unoccupied seats one week before the departure of the flights. This will help the Oman Air in generating more revenues through unoccupied seats that remain empty in the aircraft otherwise. By utilizing the latest technologies the Oman Air can achieve economies of scale. Moreover they should go for the e-commerce by proving their services online i. e. online ticket selling. This will provide an ease to the customers especially those who belong to the business class. Secondly from the Oman Air point of view it will reduce the overhead charges and also the need of infrastructure that is required for these functions. Through the use of the technology Oman Air can also develop their communication channels, can improve their navigation and the management system of air traffic. Moreover the Oman Air can convert their obsolete hangers back into good working conditions through latest available technology.

Porter Five Factor Model

The Porter five factor models will highlight the key factors that can influence the Oman Air business:

(Source: Harvard Business Review)

4. 1 Rivalry: The competition for the Oman Air is relatively high. There are many other airline services like Gulf Air that is providing the same services and serving the same market segments. The competition in the airlines sets up the final price of the Oman Air. Oman Air is providing low cost services to their customers. With the decrease in customers, there is also an increased competition in the airline industry of Oman. The rivals are equal in terms of their size and capacity. This shows that worsen the economic condition has reduced the market size and the competitors in the airline industry are competing for the remaining market segment.

4. 2 Threats of New Entry: There is a low threat of a new entrant in the airline industry due to less demand of travelling by air. There are many other hurdles which also include the government interventions and regulations.

4. 3 Availability of Substitutes: There are a large number of substitutes available. Different sources of transportation are available as a substitute. One of the most threatening substitutes for Oman Air national is high speed trains. Most of the customers of Oman Air are attracted by the airlines who are offering the same services at lower cost.

4. 4 Bargaining power of the buyers: The bargaining power of an Oman Air customer is high. There are many other airlines that customers of the Oman Air can travel by.

4. 5 Bargaining Power of Supplies: The bargaining power of the Oman Air is low as there are other large airlines in the region like Emirates, which demand economies of scale and have the power to demand from their suppliers. In other case the customer of the Oman Air will shift to the other airlines that are offering the same services.

Oman Air Marketing Objectives

Like every organization, Oman Air has some marketing objectives that they want to accomplish this year. The main objective of the Oman Air is to maximize the market share. For maximization of the market share and profit, Oman Air will develop the new innovative services. This year Oman Air is more intended to increase their business demand by 25%. Another objective of the Oman Air is to offer low fare charges than their competitors by reducing their operational costs. Other marketing objects of Oman Air refers to the 16% increase in the passengers, increasing customer satisfaction by providing high standard services and customer retention by providing them extra services. This year Oman Air will try entering into newer segments like maintenance, repair and overhaul of commercial airlines.

6. Tactics for Oman Air

Based on the above stated factors and SWOT analysis there are some marketing tactics and strategies for Oman Air.

| Product Positioning: | | As Oman Air is operating in a highly competitive environment, it is important for the airline to develop a strong image of their | | services. It will help the customer to differentiate Oman Air’s services from that of their competitors. Oman Air can position itself in | | the marketing communications as the low fare, high frequency and point to point carrier service provider both at the national and | | international level. | | Tactics of product development: | | Oman Air has also focused on the strategies of product development. The first thing on which Oman Air should work on, is the search of | | some additional channels of distribution. They should initiate some tie ups and collaborations. Oman Air should also seek some | | international collaboration. Moreover they should arrange some discussions on seats and code sharing between these carriers. | | Market positioning Tactics: | | In order to secure the market position the Oman Air should be cost effective. The business model of the Oman Air is well defined to | | reduce the overall cost.

The airline can position itself in the market by offering unique services. Telephonic check ins and creating an | | image of a common man’s airline can help improve the brand image of loyalty and trust. | | Market Development tactics: | | One of the most significant marketing development tactics includes finding new target customers and market segments. Oman Air can conduct| | a market research in order to find the new potential market segments. | | Moreover Oman Air should provide special offers to the new customers. These services include special discounts for first time flyers. | | This will attract the people from different segments to try the services of Oman Air. | | Market penetration Tactics: | | One of the most significant strategies for market penetration is to encourage the existing customers of Oman by giving them special | | privileges. Oman Air should offer some extra benefits to their customer for using more services of Oman Air. These extra benefits can be | | memberships, extra services and freebies.

Another way of market penetration is trying to look for the deficiencies and weaknesses of the | | foreign entrant’s services and try to overcome them in your own services by highlighting them to your customers. | | Diversification tactics: | | Diversification is a good strategy for Oman Air. They can go for concentric as well as horizontal diversification. Through Concentric | | diversification Oman Air can enter into more international flights along with the national flights. On the other side, through horizontal| | diversification, Oman Air can enter into a different and unrelated industry. This will protect the Oman Air from the downfall in the | | aviation industry. | | Pricing Tactics: | | Oman Air can offer lowest possible fare that enables the Oman Air to generate a most suitable profit. The pricing of the Oman Air should | | be set in such a way that it not only compete with the competitors in the airline industry but also with those that are in other | | transportation services including automobiles. Moreover Oman Air can also offer different types of fare discounts to different market | | segments. |

7. BCG Matrix:

BCG matrix is a simple tool that helps the company in identifying the position of the company in terms of the product line. This matrix will help out the Oman Air in identifying the products that need more investments, the products which they should keep and the products that they should exclude from their product line.

The products that have low market share but have high potential would not able to generate a high level of cash whereas the other products with a high level of market share can generate enough cash for Oman Air.

The true representation of the BCG matrix of Oman Air is below:

7. 1 Question Mark:

These are the products with low market share but high growth rate. These products need huge capital investments but because of the low market shares the profitability of these types of the products is low. Although the products in the question mark have the potential to gain the market share and convert into the star but in case it would not able to become the market leader it will become a dog with the decrease in the market growth. Therefore question mark should be analyzed carefully before making capital investments in these products.

7. 2 Dogs:

The products that are considered to be a dog are with low market share and growth. These types of the products consume no cash and generate no cash. These products are basically the candidates of the divestiture.

7. 3 Stars:

Stars are the products that generate large cash and high market share. These products also consume high cash with the high growth rate. By maintaining larger market shares in the market stars can convert into the cash cow.

7. 4 Cash cows:

Cash cows are considered to be the leader of a mature market. The return on assets from the cash cow is always greater than the growth rate. This means that the cash cow has the ability to generate more cash than they consume.

(Source: Harvard Business Review)

8. Academic Critique:

It is important to consider the factors that affect vital variables that influence organizational supply and demand level when analyzing the macro-environment (Kotter and Schlesinger, 1991; Johnson and Scholes, 1993). The “ radical and ongoing changes occurring in society create an uncertain environment and have an impact on the function of the whole organization” (Tsiakkiros, 2002). PEST and PESTEL analysis are just some of the tools developed to catalogue various issues affecting an industry. While PEST (political, economic, social and technological) is just a framework that captures environmental factors, two more factors (environmental and legal) are added to make PESTEL.

Kotler (1998) argues that PEST analysis is a useful strategic tool for understanding the status and potential of the business. PEST and other tools such as SWOT and Five Forces Models are useful in determining strategic directions and marketing opportunities f the business. PEST is not only useful in strategic planning and research reports but also effective in ensuring performance alignment to powerful forces (Porter, 1985) .

PEST is useful for determining market entry strategy as it helps to clear misconceptions and help the business adjust to the new environment.

8. 1 Political: The Government of U. S has increased the subsidy on diesel cars but left the petrol cars. This leads to higher purchases of diesel cars in the market. In the 80’s emission legislation in California resulted in loss of MG car market share as they could not meet pollution limits.

8. 2 Economic: Economic conditions determine the profitability of a business at any time due to its influence on capital, cost and demand (Thompson, 2002). Buyout demand results to low cost of capital and hence increased investment and profitable business and vice versa. When the general or a section of the economy grows, demand may exist for low demand products in depressed situations. Similarly, successful exploitation of a strategy may depend on demand in growth and not in recession.(Robinson and et al., 1978; Thompson, 2002). The current level of inflation has made it difficult such that firms are resorting to cutting costs and reducing profit margins as the customer can no longer bear these costs.

8. 3 Social: The social cultural environment encapsulates demands and tastes which are determined by factors such as fashion and disposable income (Thompson, 2002; Pearce and Robinson, 2005). Hough some products may experience little variation, Over-time, most products change as the markets saturate.

Organizations need to be familiar demographic structure and changes in terms of age, region, and work so as to have an idea of the demand of a particular product. Threats are bound to increase as opportunities for differentiation and segmentation emerge. Mc Donald’s has been forced to change its menu due to increased health consciousness.

8. 4 Technology: Technology is widely recognized by various strategic management analyses (Capron and Glazer, 1987; Johnson and Scholes, 1993; Jan, 2002), as part of an organization for creation of competitive advantage. However, external technology can also be captured and used with the influence of government. Technological success creates new industries that render the existing industries and their products redundant. New technologies are equally useful as inputs for manufacturing and service industries but acquisition and usefulness requires funding and employee training. Massive fall in the long distance telecommunication has led to relocation of many ‘ back office’ services to India.

The PEST analysis is a tool that is widely used by the businesses to analyze the environmental factors. The economic factors tell us the extent to which the business proves to be successful or profitable. Dale (2000) revealed that the economic conditions affect most important components of the business operations. The cost, capital and the demand get affected by the economic factors. The upward trend in the economy increases the demand of the products and services which would not be in demand in more depressed situations of economy. In the same way the implementation of a particular strategy is also dependent upon the demand of the products and services that are available in the growing economy but not at the time of downturn.

The use of PEST analysis ensures that all the activities of the firms are happening according to the forces that are affecting the surrounding business environment. Since few years it has been recognized that taking advantage of economical changes contribute more towards the success than opposing the change. The appropriate use of this tool help the companies in avoiding the situations that results in company failure in the near future due to the elements that’s are beyond the control of the firm. Through this analysis firm can take precautionary measures to avoid the worst business conditions. Conducting PEST analysis is significant when a firm is entering into a new market or entering into the new country having different political, social, and economical conditions. Through PEST analysis firms can avoid insensible assumptions about the business surrounding base on the illusions.

The analysis of the political factors could affect the economic analysis. All of the factors in the PEST are significant in the success of an organization. Some literature has called it PESTLE analysis by including the legal and ecological factors. However in most of the literature there is a doubt in the addition to the legal and ecological factors in the analysis. The prevailing doubt about these two factors is due to the difference in its importance from industry to industry. Carroll et al (1986) stated that the ecological and legal factors should be analyzed if these factors are relevant to the industry. On the other hand if these factors are not related to the analyzed industry than these factors should be allocated to other categories.

Aplin et al (1980) reported that the social environmental factors represent the demands and the testes of the society that vary with the fashion and the disposable income of the people. These changes in the social factors provide opportunities as well as threats to some of the businesses. When the market of the novel products becomes mature, it’s a time to bring changes in the promotional and pricing strategies. Walker et al (2004) claimed that the organizations should focus on the demographic changes including the number of population, age of the population, poverty, and the employment rate. These demographic changes have an influence on the demand of the particular goods and service. Because of the demographic changes the threat for the existing products increased and the opportunities for the market segmentation are also increasing. The demographic changes in the society always come up with the new choices of products and services. With the changes in the demographic trends people of the society look for the products according to their age, gender and social status.

9. Conclusion

Oman Air is basically the nominated carrier of Oman. It’s a business enterprise in Oman which is committed in providing the secure, reliable and suitable cost air transport services for passengers. Oman Air has established the partnership with the different carriers presented all over the world. Presently Oman Air has created the niche of its own tradition which is hospitality and providing air travelling services both at the national and international level. The major strength of the Oman Air is the fleets which are considered to be the most modern and fuel efficient aircraft. The one of the greatest weaknesses of the Oman Air is that the attention of the owner of the Oman Air is divided between the Gulf Air and Oman Air. Because of the diversion of attention the future of the Oman Air seems to be dark.

The latest advancements in the technology have provided the various cost reduction solutions. The technology helps in the establishment of the fuel efficient aircraft. The greatest threat of the Oman Air is from Gulf Air. As both the airlines are providing the same type of services for the same routes, which include Indian subcontinent and Middle East, which is the largest market of the Oman Air. PEST tells us the important factors that Oman Air must take into consideration while doing their marketing plan.

According to the Porter five factor model the competition for the Oman Air is relatively high, the threat of new entrant is low in the airline industry due to less demand of travelling by air, large number of substitutes is available and bargaining power of the Oman Air is low as they have to pay the premium against every strategy of their competitors. As Oman Air is operating in highly competitive environments it is important for Oman Air to develop the strong image of their products. In order to secure the market position the Oman Air should be cost effective. Oman Air should encourage the existing customers of Oman by giving them special privileges. Oman Air should work on is the search of some additional channels of distribution.

BCG matrix is a simple tool that helps the company in identifying the position of the company in terms of the product line. This matrix will help out the Oman Air in identifying the products that need more investments, the products which they should keep and the products that they should exclude from their product line.

10. References

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