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In-depth analysis of the strategic marketing problem & corporate objective analysis

Comair’s strategic marketing problem is the price fixing and world cup pricing
allegation that has affected the brands reputation and market share. Since Kulula is
the leading low cost carrier the effect that the allegations will have on its occupancy
rates is lowering them as the brand perception is tarnished. The customer loyalty will
be reduced as customers will feel like they are being ripped off.

Comair corporate objectives

• Delivering operational and services excellence

• Being a safe and professional airline

• Being socially responsible by committing to helping and uplifting local


communities

Industry analysis

Five force analysis

Porter(2008) has indentified five forces that are commonly used to assess the
structure of any industry and these forces are bargaining power of suppliers,
bargaining power of buyers, threat of new entrants, threat of substitutes and rivalry
among competitors. .

Threat of new entrants

Threat of new entrants is basically about how uncomplicated is it for business to


enter a certain market. Threat of entry in an industry depends on the height of entry
barriers that are at hand and on the response entrants can expect from incumbents
(Campbell, Stonehouse, & Houston, 2002). In the South African airline industry new
entrants are still attracted to the industry,on the other hand the large capital outlay
required can act as a restriction (Datamonitor, 2009).

Bargaining power of suppliers

The bargaining power of suppliers refers to the capability of supplier to increase


input process or to increase the cost of the industry in other ways (Hill & Jones,
2009). The South African airline industry is characterised by strong supplier
power , a outcome of the Boeing and Airbus duoply that exists in the making up of
the aircraft and the fact that as yet, no viable alternative for jet fuel has been
discovered (Datamonitor, 2009).
Bargaining power of buyers

The bargaining power of buyers is all about how much negotiation power do the
buyers have, and it desribes the effect that consumers have on the productivity of
a business (Kurtz, MacKenzie, & Snow, 2009) . The airline industry is price
receptive, many customers search for cheaper transactions, leading to strong price
competition between industry . This price sensitivity provides to increase buyer
power, on the other hand the large number of customers act to reduce buyer power,
since airlines do not feel the impact of losing an individual customer (Datamonitor,
2009). Overall, buyer power is assessed as moderate.

Threat of substitutes

Threat of substitutes is what products could customers of a certain business buy or


use instead of theirs (Porter, 2008). Threat of substitutes is high as substitute modes
of transport, such as trains, can be costly and slow replacement for air travel, but it is
likely that tools such as videoconferencing may create a threat to business air travel
(Datamonitor, 2009).

Rivalry among competitors

Rivalry among competitors is all about the intensity of competition. Rivalry between
airlines is strong, as customer loyalty in this industry is low (Datamonitor, 2009).

Competitor analysis

According to Bennett (2003) competitor analysis is a logical process that converts


value into actionable schemes, knowledge about competitor’s potential, target,
performance and positions. Comair’s main competitors are South African Airways
and its subsidiary, Mango (Comair, 2009). South Africa Airways is by far the top
company in the country with an overall value share of 59% in 2008, it has a strong
brand and Mango, its subsidiary is well positioned in the low cost carrier category
(Euromonitor, 2009). It is also adequately positioned in all airline segments in South
Africa, however its highest shares are in the mature segments and it still has to try to
win strongly in the more vibrant areas of the market (Euromonitor, 2009). South
African Airways company portfolio is somewhat narrow and limited exclusively to
airlines. South African Airways is most certainly a leader in terms of market share.
However, in terms of modernization, South African Airways has been lacking for
some time (Euromonitor, 2009).

Market segmentation, targeting & positioning analysis

According to Lamb, Hair, and McDaniel (2008) market segmentation is the


procedure of separating a market into significant, comparatively, alike and
identifiable segments or groups. In the air line industry the market is segmented into
international and domestic. With Comair it has two brands which are British Airways
and Kulula, British Airways focuses on both international and domestic while Kulula
is more focused on domestic (Comair, 2009). Market targeting is the selection of a
certain market segment toward which all marketing effort is directed (Lamb, Hair, &
McDaniel, 2008). Market targeting enables the characteristics of the chosen segment
to be taken into account when formulating a product or service and its advertising.
Since under Comair there are two brands which are Kulula and British Airways,
British Airways targets the both the business class and economy class and Kulula is
low fare airline (Comair, 2009). Kulula describes their target market as being
‘Anyone who buys a ticket’; for that reason it relevant to the young, elderly,
businessmen and women. Positioning is the process by which marketers try to
create an image or identity in the minds of their target market for its product, brand,
or organization. With Kulula it is positioned as a no frill brand, simplicity, affordability,
reliability and quality and also as inspirational, fun, safe and professional and British
airways is positioned as a luxury, safe, reliable and convenient airline (Comair,
2009).

Financial analysis

Financial analysis refers to an evaluation of the capability, stability and profitability of


a business. The following ratios are going to analysed liquidity measurement ratios,
profitability indicator ratios, cash flow indicator ratios and operating performance
ratios.

Ratios
Liquidity measurement
ratios
Current ratio 0.87137
Quick ratio 0.860493
Cash ratio 0.410013
Profitability Indicator
Ratios

Profit margin analysis 2.396006


Cash Flow Indicator
Ratios

Operating Cash 11.49118


Flow/Sales Ratio
Dividend Payout Ratio 49.37371
Activity/Operating
Performance Ratios

Sales/Revenue Per 1710.877


Employee

Liquidity measurement ratio attempts to measure a company's ability to pay off its
short-term debt obligations. The ratios must be higher than one to show that the
company is able to pay of its short term obligations. With Comair’s liquidity
measurement ratios from the above table are all below one and therefore conclude
that it’s not capable to pay of its short term debt obligations. Profit margin analysis
indicates what portion of sales contribute to the income of a company and 2.4%
means that for each dollar of sales that Comair generates it is contributing 2.4 cents
to its net income. Operating cash flow/sales ratio gives investors an idea of the
company's ability to turn sales into cash; Comair has approximately 12 cents of
operating cash flow in every sales dollar. The dividend payout ratio provides an idea
of the percentage of earnings paid to shareholders in dividends and Comair’s has
49.4% of earnings paid to shareholders in dividends. Lastly the sales/revenue per
employee for Comair is R1 710 877 in the year of 2009.

Articulation of alternatives problems /and issues

Comair has a difficult in obtaining tenders because there are no clear indications of
economic recovery in the local market for air travel

Competition is going to be intense in the low cost carriers as there are imitations of
Kulula’s services.

The recession has led to consumers to reprioritise and to focus on living more
financially sustainable lives therefore opting for cheaper airlines .
Bibliography
Bennett, R. (2003). Competitor analysis practices of British charities. Marketing
Intelligence & Planning , 21 (6), 335-345.

Bensoussan, B. E., & Fleisher, C. S. (2008). Analysis without paralysis: 10 tools to


make better strategic decisions. New Jersey : FT Press.

Campbell, D., Stonehouse, G., & Houston, B. (2002). Business Strategy: an


introduction (2 ed.). Burlington: Butterworth-Heinemann.

Comair. (2009). Annual Report 2009. Comair .

Datamonitor. (2009). Airlines in South Africa: Industry Profile. Datamonitor.

Euromonitor. (2009). South African Airways (PTY) Ltd -Travel and Tourism - South
Africa. Euromonitor International .

Hill, C., & Jones, G. (2009). Strategic Management Theory: An Integrated


Approach (9 ed.). Mason: Cengage Learning.

Kurtz, D. L., MacKenzie, H. F., & Snow, K. (2009). Contemporary Marketing (2


ed.). Cengage Learning.

Lamb, C. W., Hair, J. F., & McDaniel, C. (2008). Essentials for Marketing (6 ed.).
Mason: Cengage Learning.

Porter, M. E. (2008). On Competition: A Harvard business review book series.


Boston: Harvard Business Press.

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