• Internal Code :
  • Subject Code : MNG00114
  • University : Southern Cross University
  • Subject Name : Business Management

Executive Summary

In this report we have discussed certain factors that affect Hainan airlines. Different environments of this business model, their characteristics and their implementations.

Certain factors that are impacting on the Hainan Airline services and enabling them to increase the quality of the service. Also few recommend nations that can help in enhancing the airlines popularity in the global market are also discussed. They are-

  • Increasing quality of service

  • Using advanced technology in airlines for attracting customers.

  • Hiring capable workforce crew to meet customer satisfaction.

In this report, discussion about the internal and external environment of the airline business model of Hainan is made. The SWOT and PESTEL analysis has been done to understand the pros and cons of the Hainan Airlines.

Table of Contents

1. Introduction 

2. Analysis of the Internal Environment 

3. Analysis of the External environment

3.1 Analysis of the macro-environment

3.2 Analysis of the Industry Environment

4. Recommendations

6. Conclusion

Reference

1. Introduction

Hainan Airlines is one of the leading domestic and international-based airlines. Its headquarter is situated at Haikou, Hainan in the People's Republic of China. Hainan Airlines is the Tenth largest airline in the whole of Asia and fourth-largest in China (according to the fleet size). It covers more than 400 routes, including international and national flights all over Asia. It runs charter services along with mainland airline services. Its main focus cities are placed in China with Headquarter in Haikou, Hainan, PRC. Hainan Airlines as one of the well-recognized airlines in Asia. The main base of Hainan Airlines is Haikou Meilan International Airport. It is rated 5 star by Skytrax which is the United Kingdom based consultant which give reviews to airlines and airports. The detailed outline of this description separates into three major parts. These are-

  • Analysis of Internal Environment

  • Analysis of External Environment

  • Recommendations to the Airline

The main purpose of this description is to recognize the plans needed to take by Hainan Airlines to keep going its position as worldly accepted airlines. Through this report, the main points include the desired goal of Hainan Airlines. To stay in a competitive market, these changes in the plan are important.

2. Analysis of the Internal Environment

Hainan Airlines is working for many years in the market of the Aviation Industry. During this stay in the market of the Aviation Industry, Hainan Airlines faced many problems. Nowadays competition is very high, so this airline faced various competition from the beginning.being in the business environment which is very competitive in nature, so to match up with this type of competition, internal environment strategies played an important role to manage this kind of situation to reach the desired success of Hainan Airlines. Hainan Airlines is one of the world's leading airline companies. It has a worldwide global presence, and this airline is known for its quality aeroplanes, superior customer service and a healthy and free atmosphere. Due to the emergence of other airline companies, this organization needs to change some strategies to stay in the market. To give better service than other Aviation companies, Hainan airlines need to change some of the strategies which further help them to grow and flourish as a superior airlines company. (Pati, et al, 2018)

By using various techniques, the internal atmosphere of the organization can be known. The most important point that needs to be thought before analyzing the internal environment of the company is the assets and the ability of the airline company.

  • Brand equity: Brand Equity is the expression used in the marketing business which touches on to the recognized worth of social values of a recognized brand name. Brand equity is the most important key advantage of every airline organization. It is a strong point that helps the brand to become unique from the rivalry. To maintain fine brand equity is very much important which helps in maintaining the strength of other strategies. If an airline company has various components together, but the company could not make superior brand value, then it is an indication of weak customer service. Hainan Airlines is recognized to be a brand concentrated on passengers. Passengers have faith in these Hainan airlines. Many units helped Hainan Airlines to develop a well defined and powerful brand name. This led to the competition at a superior level and also superior consumer loyalty. The key reason to form superior brand equity is to give a focal point on the customer. Hainan airlines supplied the passengers with good quality aeroplane and quality customer service rather than dependent on the strategies of the advertising(Simon, 2018).

  • Global Presence: In the recent and influencer markets, global presence is one of the most important strategies of the business. For the needs of the passengers, Hainan airlines respond very effectively. The important edge of the Hainan airline is that they have a wide global presence. Hainan Airlines has developed the idea that they will provide low rate service to the customer and good quality planes which are going to different places and the work will be very much easier. Customer service will be of superior quality as Hainan Airlines provides worldwide 500 routes. By increasing more routes, Hainan airlines can achieve much more success and develop a great global presence. They have established their business in Hainan and nine other areas in China. They are getting an excellent reaction from the public of China(Tallman, et al, 2018).

  • Customer Loyalty: The rise of competition in the market recently is very clearly seen. The famous organizations also kingpin simply on the cost, customer loyalty and retailing to increase their number of customers. Hainan Airlines has also been funding superior goods and focusing on the experience of the consumers. Hainan Airlines has come about with new strategies like superior quality food service, tv service, which help the consumers to be more relaxed. Many people travel by aeroplanes for their office work. So with their intense pressure on work, if they can relax then this will give them a good experience in an aeroplane which can result in an increase in customers. Again passengers get a very good experience if they comfortably travel in their journey. With the progress, the airlines have changed their tactics to assist the passengers to work better with the strategies to give them good services. These characteristics help to win the heart of the passengers and to achieve more brand loyalty(Ramanathan,et al, 2017).

  • Plane quality: The quality of the plane is one of the main important factors of the company in the aviation industry. By using high-quality planes, more customers can be earned. Hainan Airline has many modern planes by introducing more modern aeroplanes so more people can be influenced and attached more to the airlines, which result in the success of Hainan Airlines(Kim, 2016).

  • Customer service: Hainan Airlines from the very first, is a passenger-centric company. Hence it highlights the superior rate of passenger happiness. By highlighting customer service, Hainan airlines have influenced a large number of passengers and also developed customer loyalty. This airline also emphasizes on customer safety. To attain superior passenger happiness and huge sales, passenger assignment has become uppermost. The passengers are influenced with good planes, service, comfort and most importantly, the behaviour of the air staff (Dziedzic, et al, 2016).

To realize the competitiveness of the market, SWOT analysis can be used. This analysis is the most used and known business analysis. It became popular due to its simplicity in nature. The full form of SWOT is Strength, Weakness, Opportunity and Threats. This tool can be used to know the strategies needed for the betterment of the company. This SWOT analysis allows the company to recognize their strength, low their weakness, use their opportunity, and minimize the threats. Using this analysis, Hainan Airlines can differentiate them from their competitors, compete in the market successfully(Sarsby, 2016).

Strengths

Hainan Airlines is one of the most expensive airlines service providers. Hainan Airline is also the most important airline carrier in China. The hub of the airline is Haikou Meilan International Airport. It envelops more than 500 flight paths together with international and national planes all over Asia. It runs plane services along with continent airline services. Hainan Airline works in an environment where it faces different political issues. In the tactics area, this company needs to develop a successful relationship with the Government. Superior quality products also help Hainan Airline to increase their market share.

Weaknesses

The weakness comes from a lack of resources. Though the demand is not down some passengers are not satisfied. It can be seen in the reviews from them. Record of Hainan Airlines on environmental issues is not good. In some cases, there is a low return on investments. Local wars dominate organization culture among various sectors. This further chokes the betterment of the company.

Opportunities

Hainan Airline can hold the increasing standardization to turn down the contributions in the market and should be focused on marketing efforts. Changing in the technology landscape can be an opportunity and can use this in the development of reduced cost and changing processes. The risk of the market can be reduced by globalization down with resounding social media.

Threats

The bargaining powers of the passengers have increased. Due to increasing protectionism, the geopolitical element has taken a go-round. Due to increasing inequality is the biggest threat. The fast-changing government rules should be watched carefully, which also a threat to this company.

3. Analysis of The External Environment

3.1 Analysis of The Macro-Environment

In today's world, market grounds are fluctuating, and recession is occurring at every interval. But there is no stoppage point of travellers travelling all across the world. There are several people across the world whose jobs required a lot of travelling from one country to another. Recent studies clarify that it is only the airline business which thrives even during the time of recession. People need to move from one place to another for several jobs related or other reasons(G Anzaldúa,et al, 2019). For this, they need an advanced transport system all the time.

Understanding the nature of any business model needs an analysis of the market environment. In order to perceive the factors affecting the business market, PESTEL analysis can be done (Perera, 2017).

  • Political factors - Political factors play a huge role in business investments and several cooperations of governance, certain institutional and democratic and legal systems of the business market. Political Environment of any business model enhances the ability to sustain the business level for a long period of time.

Political factors affecting Hainan Airlines- People's Republic of China is a huge country consisting of several politically divided government agencies. This reduces the enhanced risk on a single agency and enables Hainan to survive a downsizing market. The high spirited civil society enables the Government to cooperate within their political barriers. This enhances the different parties of the Government to maintain the policies in the treaties made by the previous leaders of those parties. This stable political environment enables Hainan Airlines to create strategies to increase their vision(Rozenberg,et al, 2019).

  • Economic Factors - Economic factors play an important role in attracting customers in the market. Certain economic factors affecting the market evaluation of Hainan Airlines are-inflation rate, disposal income level, GDP growth rate etc.

Economic factors affecting Hainan Airlines- China is an economically developed country; their consumers are economically strong. For this reason, Hainan Airlines have incurred less loss in China. But in other underdeveloped countries, the customers are more vulnerable in case of economic background. So Hainan Airlines has to be careful about other markets. There can be a lack of income inequality in China, but the scenario is not the same everywhere.

Moreover, China is creating a deficit budget for the past few years which enhances the sales of the products and service of Hainan Airlines. Also, the Federal Reserve by the Chinese Government enhanced the liquid cash flow and enabled Hainan Airlines to borrow money to meet their business demand. It can be beneficiary, yet it has a risk of an increase in the interest rate in future. The economic background of China can be promising, but it can be risky in other countries for which Hainan Airlines need to be cautious (J Bleicher,et al, 2016).

  • Social Factors - Social factors have an important part in any business model. It includes trends in demography, power structure and participation of women in the workforce. This impacts the economic growth of the country as well as the availability of talents in the workplace and increased customer demands for the service that the company is providing.

Social factors affecting Hainan Airlines- Hainan Airlines required to understand the relationship between society and the Chinese Government before entering this business market. The data on this market enables them to enter and flourish in the Chinese market. But in order to increase the horizon, Hainan Airlines needs to get hold of this data on other countries before extending their market. For example- The understandability of the Government and the society in India is way different from China. This can lead to a risky step to enter the Indian market before understanding the societal culture of this country. Moreover, the workforce in China consists of capable women workers, and gender inequality is almost absent there. But the societal scenario is different in India, where it is difficult for the women to participate in all managemental workforce due to discrimination. Also, lack of saving attitude among Indians enhances the customers to travel using transportation of low cost and thus can hamper the Hainan Airline Business in India. This lack of economic growth in India due to a varietal negative social approach can be misleading for the airline service in India, although it is a beneficiary for the society of China(Rotondo,et al, 2019).

  • Technological Factor- Advance technology and the factors affecting the business models make it important to discuss this analytical topic. Introduction of artificial intelligence and using advanced machines to carry out the service procedure effectively and understand the behaviour of customers will help in understanding technological trends in the macro-environment.

Technological factors affecting Hainan Airlines- China is a technologically advanced country. Hainan Airlines has used artificial intelligence and advanced technology to enhance the low-cost production of service and effective methods of meeting customer demands. The increased investment in the technological development sector by Hainan can be beneficial in China. But in developing or underdeveloped countries, the advancement in technology is absent. Expanding the business in such a part of Asia can amplify a huge cost of providing the service incurring loss in the business market. Hainan needs to imply new business strategies which will unite societal values and infrastructure for this Business model(Taneja, 2017).

  • Environmental Factor - Any Business model requires an ideal environment to flourish in the market. Changing ecosystems and different climatic hazards affect environmental factors for any business model.

Environmental factors affecting Hainan Airlines- Climate change can affect the Hainan Airlines business model in many ways. For Example-If any Environmental hazards occur, Shipments for one place in the world to others will be delayed, which can create a negative impact on the customers or the clients(NJERI,et al, 2018).

  • Legal Factor - Legal factors comprise certain rules and regulation that every business model requires to enter into the market in certain places. These rules are especially based on the norms followed by the governance of the country.

Legal factor affecting Hainan Airlines- The legal system of the country processes both the domestic and international flights under the same rules and regulations. Lack of capricious approach makes the legal factors for Hainan Airline much more firm as a business model.

3.2 Analysis of The Industry Environment

Hainan Airlines has been successful in accomplishing wonders for years. But in order to know the industrial environment of Hainan Airlines, we need to analyze it using the factors of Porter's study of several factors(J Franke,et al, 2017).

  • New entities in the market- Over the past few years, several new airline companies have come into existence, for example-Air China, Shanghai Airlines, Shenzhen Airlines etc. Due to a subtle competing market, Hainan needs to enhance the quality of service to compete with new entries in the market.

  • Substitutes in the market- There are several substitute airlines in all over Asia. Many new airlines are emerging and providing great quality service. This can create difficulty for Hainan's survival in the market. To reduce the risk, Hainan Airlines needs to increase the quality of the service and compete efficiently with other substitute airlines in this business model.

  • Bargaining power of the customers- Over the years, the customers of the airline transportation system has increased drastically. Although several new airlines have come into existence, the premium quality service provided by Hainan Airlines has created satisfaction among the customers. This has enabled them to attract customers to get hold of their transportation service more often, and the customer shift is also very low.

  • Competition in the market- The competition in this business model over the past few years has increased drastically. Emerging new airline companies have created a shift of taste and created a new approach of the customer about other airline companies. But the goodwill of the Hainan Airlines has let them compete with other airlines and maintain the same honour without incurring huge losses.

4. Recommendations

Certain recommendations based on the factors discussed in the analysis of the business model are-

  1. Hainan Airlines belong to the '90s, and most of their planes lack advanced technology which creates customer dissatisfaction. Although they have launched a few airlines with advanced technology. They need to upgrade all their airlines to compete with advanced airline service of recent years.

  2. Hainan Airlines need to upgrade the quality of their service. In today's world, several airlines are providing quality service to their customers. For this, they need to target highly on customer satisfaction for competing efficiently in the market.

  3. There are several substitute airlines in this business market. If customers taste changes, Hainan Airlines will incur a loss. Hainan Airlines has to get the data on customers to taste and work accordingly to compete in the market.

  4. Hainan Airlines has to resolve the issues regarding the environment. Quality of the workforce pilots to handle any environment and maintain customers safety will be their utmost priority. Hainan Airlines crew members providing service have decreased in quality over the years, which created a customer dissatisfaction.

  5. Customers are losing faith in Hainan Airlines due to lack of service quality. Customers are getting quality service from other airlines at a cheap price. So Hainan needs to increase the quality of service better than other airlines, decreasing the price of their service. This can reduce the profit margin, but will intensify customer satisfaction.

  6. Increasing global presence of Hainan Airline will be a beneficiary for their existence. If Hainan airlines increase their vision and market all over Asia, its global effectiveness will lead to increased reliability among customers.

6. Conclusion

Hainan Airlines has been influencing its passengers with the best assistance for many years. They have also kept going with the solidity for the betterment of the company. The company needs to change its tactic and also conserve the brand picture among the passengers due to the changing of environment. This report is made to know the changes required for the betterment of Hainan Airlines. This report can change the future of the company. This report describes the working of Hainan Airlines, assesses its performance, and recommends the company. By incorporating these changes, Hainan Airline can provide its passengers with the best quality service.

Reference

Anzaldúa, G., Abhold, K., Araujo, A., Chebotarev, A., Cosnita, D., Diaconescu, T., Dimov, L., Duic, N., Iorgulescu, R., Kiresiewa, Z. and Lazdina, D., 2019. The macro-environment surrounding BE-Rural's Open Innovation Platforms.

Bleicher, J. and Stanley, H., 2016. DIGITIZATION AS A CATALYST FOR BUSINESS MODEL INNOVATION A THREE-STEP APPROACH TO FACILITATING ECONOMIC SUCCESS. Journal of Business Management, (12).

Dziedzic, R.M. and Karney, B.W., 2016. Analyzing water customer service expectations: a case study of the City of Guelph. Utilities Policy, 41, pp.67-76.

Franke, J. and Gustafsson, M., 2017. Industrial Internet of Things; How technology providers capture a competitive edge by analyzing the Business Model Environment.

Kim, J., 2016. The platform business model and business ecosystem: Quality management and revenue structures. European Planning Studies, 24(12), pp.2113-2132.

NJERI, M.E. and SUSAN, D.W., 2018. INFLUENCE OF MACRO-ENVIRONMENTAL FACTORS ON ORGANIZATIONAL PERFORMANCE OF AIRLINES: A CASE STUDY KENYA AIRWAYS LTD. International Journal of Social Sciences Management and Entrepreneurship (IJSSME), 1(1).

Pati, R.K., Nandakumar, M.K., Ghobadian, A., Ireland, R.D. and O'Regan, N., 2018. Business model design–performance relationship under external and internal contingencies: Evidence from SMEs in an emerging economy. Long Range Planning, 51(5), pp.750-769.

Perera, R., 2017. The PESTLE analysis. Nerdynaut.

Ramanathan, U., Subramanian, N., Yu, W. and Vijaygopal, R., 2017. Impact of customer loyalty and service operations on customer behaviour and firm performance: empirical evidence from UK retail sector. Production Planning & Control, 28(6-8), pp.478-488.

Rotondo, F., Corsi, K. and Giovanelli, L., 2019. The social side of sustainable business models: An explorative analysis of the low-cost airline industry. Journal of cleaner production, 225, pp.806-819.

Rozenberg, R., Liptáková, D., Tobisová, A. and Makó, S., 2019. IMPACT OF STATE'S POLITICAL STABILITY ON COMPANY'S ECONOMY—CASE STUDY OF PEGASUS AIRLINES. American Journal of Fundamental, Applied & Experimental Research, 13(2), pp.5-13.

Sarsby, A., 2016. SWOT analysis. Lulu. com.

Simon, S.S., 2018. An Empirical Analysis on Brand Equity Building of Leading Private Business Schools. SFIMAR Research Review, 13(1), pp.3-17.

Tallman, S., Luo, Y. and Buckley, P.J., 2018. Business models in global competition. Global Strategy Journal, 8(4), pp.517-535.

Taneja, N.K., 2017. Driving airline business strategies through emerging technology. Routledge.

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